Treasurer Chris Bowen says any spending cuts the Federal Government makes in its updated economic statement will be "tough" but "responsible".
The budget update is due to be released this week, sometime after Wednesday, and is expected to reveal further large revenue writedowns.
Cabinet is meeting this afternoon to consider the budget position following discussions by the powerful expenditure review committee this morning.
Mr Bowen has promised to stick with the May budget commitment to bring the budget back to surplus in 2016-17 but says that will mean some "tough" decisions.
"If you are returning to surplus and there is a reduction in revenue, then there are decisions that need to be made, responsibly, to get to surplus," he told ABC News 24.
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"Our key strategy here, our key objective is to ensure that we continue to support jobs and growth.
"That means not cutting to the bone in these circumstances, not reckless cuts to schools or hospitals or important services for people, but taking responsible decisions so that we are returning to surplus over the cycle."
The economic statement appears to be the final policy step on the Government's agenda before it calls an election.
Yesterday was the last day Prime Minister Kevin Rudd could have called an August 31 election, prompting fresh speculation that he will call it this weekend for September 7.
The Treasurer says there will be a "political downside" for Labor out of any decision to make further spending cuts.
"Obviously, any tough decision in this environment is tough politically," Mr Bowen said.
"But that doesn't mean you avoid those tough decisions. That's not what this Government is about."
'Labor is addicted to taxing'
Opposition Leader Tony Abbott says the Government is "in panic" over the budget.
"The Cabinet just doesn't know what to do over the state of the budget," he said.
"There are some people who are saying there needs to be expenditure restraint, there are others who are saying spend, spend, spend to try to buy the next election.
"The truth is we do need expenditure restraint but, at least as much as that, we need a clear plan to grow our economy and we will never get that under Labor.
"Labor is addicted to taxing, they're addicted to spending and they're addicted to regulating."
The Government's move to make clear the depth of new revenue writedowns and any associated spending cuts is in part meant to mitigate the impact of new Treasury figures, which will be contained in the pre-election fiscal outlook (PEFO) released in the first 10 days of an election campaign.