Jobs vow casts Budget doubt

There are fresh doubts about the state of the Budget after Tony Abbott pledged a jobs package and raised question marks over a range of contentious spending cuts.

After admitting that last year's Budget was "too bold and too ambitious", the Prime Minister said yesterday that a small business tax cut would be part of a jobs package that would be released with a families package.

The families package is expected to include measures to make child care more affordable in a shift that would add to Budget costs.

The spending measures follow the mid-year Budget update that showed the Commonwealth's fiscal bottom line deteriorating because of falling commodity prices.

Iron ore prices have slipped below $US63 a tonne and the Reserve Bank has trimmed its forecasts for the strength of the economy and justified last week's cut in interest rates by warning about a rise in unemployment.

Mr Abbott, who campaigned strongly to repair the Budget, yesterday focused on the Government's spending plans.

"We start in the next few months with the families package that have I have been talking about with the small business and jobs package, which will focus on a tax cut for small business," he said.

"This is what the Australian people want."

There was some initial confusion about the extent of Mr Abbott's Budget backdowns, with WA dissident Luke Simpkins initially saying the PM had abandoned the $7 Medicare co-payment. It would blow a $3.5 billion hole in the Budget.

Mr Simpkins later clarified that the fate of the co-payment was a matter for consultation between Health Minister Sussan Ley and the medical community.

Mr Abbott told his party room there would be no new proposals on health put forward without the broad backing of the medical profession.

"I was health minister for four years," he said. "I rapidly came to the conclusion that in any dispute between a politician and a doctor, the doctor normally won."

Australian Medical Association president Brian Owler said the Government must ditch its "disastrous" Medicare co-payment model, including a $5 cut to doctors' rebates and a freeze on indexation of rebates until 2018.

The Business Council said the Government needed to refocus on policies to boost the economy.

"These changes include a sensible, strategic approach to repairing the Federal Budget, a more competitive tax system, the removal of unnecessary, unwieldy red tape and a more flexible workplace relations system," council chief executive Jennifer Westacott said.