Thousands of families will be stripped of their welfare payments and the States deprived of $80 billion in school and hospital funding in Joe Hockey's first Budget that sets its sights on achieving a surplus within four years.
Leaving few areas of government spending untouched, the Treasurer revealed debt would be slashed by $300 billion over the next decade to drag the nation's finances to within $2.8 billion of surplus in 2017-18.
Every welfare payment, except the pension, will be either frozen for at least two years or reduced. From 2017, the pension will be indexed permanently to inflation.
Stay-at-home mums will be forced back to work after their youngest child turns six, and Family Tax Benefit Part A payments will start to reduce once household incomes exceed $94,316 a year.
The threshold for FTB Part B will be slashed to $100,000, down from $150,000.
This will see about 140,000 families lose welfare payments once the changes are phased in over the next three years.
Changes to welfare benefits will generate the biggest saving, reaping $8.3 billion in savings over the next five years, shading a $7.9 billion cut to foreign aid.
From July 1 next year, the sick will have to pay $7 co-payments for bulk-billed visits to the GP, out-of-hospital pathology and imaging services, as well as an extra $5 for Pharmaceutical Benefits Scheme scripts from January 1.
Two dollars from every $7 co-payment will go to the doctor or service provider and $5 will go into a Medical Research Future Fund until it reaches $20 billion.
Mr Hockey said he had built tax cuts into his "contribute and build" Budget. They are expected to be unveiled closer to the 2016 election.
The Budget confirmed that high-income earners will pay a deficit tax of 2 per cent for income over $180,000, capped for three years.
Petrol fuel excise, which has been frozen at 38.1Â¢ a litre since 2001, will be indexed twice yearly, beginning on August 1. Within three years, motorists will be paying an extra $990 million in taxes a year.
Prime Minister Tony Abbott promised before the election not to increase taxes.
But Mr Hockey yesterday defended the broken pledge, saying "the most significant promise we made was to fix the budget".
About 800,000 small and medium-sized businesses will get a 1.5 percentage point cut to company tax from July next year.
For about 3000 large companies, the tax cut will offset the Government's paid parental leave levy.
Significant higher education changes will allow universities to set their own tuition fees from 2016.
This will likely see the established "sandstone" universities set premium prices for their degrees. Students will remain eligible for concessional loans, albeit at a less generous rate.
Instead of being linked to CPI, loans would be repaid at the cost of Government bonds, capped at 6 per cent. And by lowering the income at which students must start repaying loans, the Commonwealth will receive $3.2 billion extra from HELP loans over four years.
From July, the Government will offer concessional trade support loans worth up to $20,000 for four-year apprenticeships.
In a potential flashpoint for Commonwealth-State relations, the Federal Government plans to shave $80 billion off school and hospital funding over the next 10 years by adopting what it calls "sensible indexation". This comprises $50 billion for hospitals and $30 billion for schools.
Without this indexation change, WA was scheduled to receive an extra $8 billion for its schools and hospitals.
Premiers will be furious at this change and States are likely to demand an urgent review of the GST with a view to expanding its scope and its rate.
Shadow treasurer Chris Bowen said the Budget was "built on Tony Abbott's act of mass deceit".
"Every family in Australia would be hit by new taxes and cost-of-living increases," Mr Bowen said.
Welfare groups said families, pensioners and young people would bear the brunt of the Government's Budget cuts.
"There are measures in this Budget that rip the guts out of what remains of a fair and egalitarian Australia," St Vincent de Paul Society chief John Falzon said.
Business Council of Australia chief executive Jennifer Westacott said the Budget was a "solid start" but more work needed to be done to support growth.
Ms Westacott said it was disappointing "ad hoc" measures such as the deficit levy had been included and said she was concerned savings fell too heavily on some families and young people trying to find work.
Greens leader Christine Milne said: "This is a divisive and brutal Budget written in the boardrooms of big business.
"Tony Abbott's rhetoric about sharing the burden is a lie."
Tony Abbott's rhetoric about sharing the burden is a lie. " Greens leader Christine Milne