Another 10,000 first home buyers will only have to save a five per cent deposit thanks to an extension of a federal government scheme but Labor has poured cold water over the plan, arguing it's not enough to help.
The First Home Loan Deposit Scheme will be available from budget night next Tuesday to June 30 next year.
It allows first home buyers to obtain a loan for a new or newly built home with a deposit of as little as five per cent, with the government guaranteeing up to 15 per cent of the loan.
The scheme has already helped close to 20,000 first home buyers.
Treasurer Josh Frydenberg said the loan deposits could be used in conjunction with HomeBuilder, which provides grants of $25,000 for new homes and major renovations.
"Helping another 10,000 first home buyers buy a new home through our First Home Loan Deposit Scheme will help support all our tradies right through the supply chain including painters, builders, plumbers and electricians," Mr Frydenberg said.
"At around five per cent of GDP, our residential construction industry is vital to the economy and our recovery from the coronavirus crisis."
The price caps will be higher for this round of the loan deposit scheme, including $950,000 for Sydney, $850,000 for Melbourne and $650,000 for Brisbane.
Labor is calling on the government to expand the scheme, claiming the construction industry is "going off a cliff" and more is needed to save it.
Housing spokesman Jason Clare called for the government to lift the cap on how many first home buyers can be helped under the scheme.
"It shouldn't be a lottery for first-time buyers, whether they get help or not," he told reporters on Saturday.
"We've got a housing industry at the moment that's in crisis. We need to do more to help the tradies and all of the million workers who work in building homes for other Aussies."
Tuesday's budget will show a record $200 billion deficit and debt heading towards $1 trillion as the government seeks to stem the economic damage from the coronavirus pandemic.
It is widely expected to bring forward income tax cuts, deliver a raft of tax breaks for business, introduce a wage subsidy for hiring extra workers and boost investment in infrastructure and manufacturing.
Some economists also predict the Reserve Bank will cut interest rates to a record 0.1 per cent and make other policy changes to add bang to the budget's buck.
Mr Frydenberg has pitched the budget as a two-step process, with a spending boost now to fuel growth and get people back into work followed by a shift back to fiscal restraint once unemployment is "comfortably back under six per cent".
Unemployment reached 6.8 per cent nationally in August, with the three hardest-hit states being SA, Queensland and Victoria, and youth unemployment sitting on 14.3 per cent.
The Australian economy contracted by seven per cent in the June quarter, confirming a recession following the 0.3 per cent decline in the March quarter.
Labor is concerned the winding down of the JobKeeper wage subsidy and supplemented JobSeeker payment shouldn't happen when the economy and labour market remain weak.
It wants a comprehensive jobs plan.