Abbott, Hockey stand by budget

Prime Minister Tony Abbott is confident he can get controversial budget measures through parliament. Source: AAP

PRIME Minister Tony Abbott is confident his first budget can survive a two-pronged attack from state premiers and the Senate.

State and territory leaders have organised a meeting for this Sunday to discuss concerns over the federal budget's $80 billion cut to school and hospitals funding.

Labor and the Greens are poised to block many of the budget measures, with the government left to horse-trade with new Senate cross benchers after July 1 to pass a new Medicare co-payment and pension and welfare changes.

Mr Abbott does not believe the Senate will frustrate the budget, but he is open to negotiations.

"I'm not going to be absolutely unreasonable," he told Sky News on Thursday.

However, the prime minister put the responsibility in Labor's hands, arguing the previous government created the budget mess and Opposition Leader Bill Shorten needed to offer his own solutions if he did not accept those of the coalition.

Mr Abbott said Labor previously had supported co-payments for health services while pensioners would have more money in their pockets after the carbon tax was abolished.

Offering an olive branch to the states, Mr Abbott said he had indicated to the premiers the government would fund schools and hospitals based on rises in line with inflation "plus population factor".

Treasurer Joe Hockey says the states will still receive $400 billion in the six years from 2017 for schools and hospitals, once the agreements signed with the previous Labor government expired.

"It is not cost-shifting because we don't run the schools or hospitals," he told ABC TV.

Asked whether he was prepared to horse-trade with senators, Mr Hockey said any changes to the budget would mean debt and deficit would be reduced at a slower rate and medical research would not receive extra funding.

Mr Shorten, who will deliver his budget-in-reply speech on Thursday night, said the budget cuts would rip $5000 a year out of the average family budget.

"I've got some advice for Tony Abbott ... why don't you horse-trade away your paid parental leave scheme ... and perhaps leave the pensioners alone."

Labor has yet to decide whether to support a temporary income tax rise for people earning more than $180,000 a year, but it will oppose the Medicare co-payment, pension changes and the fuel tax lift.

Mr Hockey said the $7 Medicare co-payment was only about the cost of two "middies" of beer and much less than the $22 cost of a packet of cigarettes.

Mr Shorten said the treasurer's comments showed he was out of touch with ordinary Australians.

The Greens will support the fuel tax rise.

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