LEIGH SALES, PRESENTER: A major business figure says if he were Prime Minister, he'd call a double dissolution election.

Roger Corbett, a Reserve Bank board member and the chairman of Fairfax Media, says the hostile Senate means governing has become almost impossible.

But Tony Abbott seems unlikely to heed that advice, instead today laying more groundwork for his Government's second budget, due in a month.

He's confirmed that there's now a $30 billion hole in the nation's finances, thanks to the sharp slump in the price of iron ore.

Here's political correspondent Sabra Lane.

TONY ABBOTT, THEN OPPOSITION LEADER (Aug. 25, 2013): It's performance, not promises, that will earn your respect. You know it's actions, not words that you are looking for.

(Aug. 7, 2013): That's what good political parties do: they under promise and they over deliver.

SABRA LANE, REPORTER: In the lead-up to the 2013 election, the Prime Minister made a lot of the Coalition's promise to cut the company tax rate from July this year.

TONY ABBOTT (Aug. 7, 2013): Reduced company tax will result in more economic activity and more economic activity, it will be good for jobs, it will be good for prosperity and ultimately it will be good for government revenue.

SABRA LANE: As recently as December, the Government restated its intention to keep that commitment. Today, it was formally dumped.

TONY ABBOTT: As well on July 1, the tax arrangements previously flagged, a general company tax cut, coupled with an offsetting levy to pay for a more generous parental leave scheme, won't go ahead.

SABRA LANE: Instead, the Government will focus on delivering a childcare package and a tax relief for small business and it's crafting the package while grappling with a multibillion-dollar problem: falling revenue due to the massive slump in the price of iron ore. For months now it's been sliding. It's gone from $120 a tonne at the last election to less than $50 a tonne today, and the Prime Minister's now put a figure on the size of the hole now punched in the budget as a consequence.

TONY ABBOTT: Since last year's budget, collapsing iron ore prices and the consequent writedown in tax receipts have already driven a cut in government revenue of more than $30 billion over four years. But these changes are not insurmountable. Our economic plan is flexible. It's flexible enough to adapt to the challenges that we face.

SABRA LANE: But Mr Abbott warns future planned packages for childcare and small business will be entirely dependent on cuts found elsewhere.

TONY ABBOTT: To achieve all of this, new spending will have to be offset by responsible and fair savings. That's why our childcare initiative for families is contingent, it is contingent on the delivery of savings to pay for it, because we can't have the spending without the saving to make it sustainable.

SABRA LANE: That was a message for the Senate. It's blocked contentious measures from last year's budget because the Opposition, the Greens and crossbench senators argued many of the policies amounted to broken promises for which the Government has no mandate.

Roger Corbett, a respected business figure and Reserve Bank board member, was in the audience for the Prime Minister's speech.

ROGER CORBETT, BUSINESSMAN: Well the problem is of course the Government were elected with an overall majority. The election system in Australia has allowed us to have fragmented parties in the Senate. And of course they have their own self-interest. They also - their power is really resisting and not agreeing. And the more they resist, the more publicity they get and the more their constituent bodies support them.

SABRA LANE: Mr Corbett is a Liberal Party member.

ROGER CORBETT: If I'd been the Prime Minister I'd be very inclined to call a double dissolution and say, "People of Australia, you've elected me. I can't govern." And if we've got a split Senate, we cannot hold our government responsible to act as we voted them. And I think the voting people of Australia, all of us, are responsible for the split Senate we've had that really makes government in Australia almost impossible.

MARCUS BLACKMORE, BUSINESSMAN: Look I think we've all got to do our bit. I think business has got to do its bit, and if we don't do that, Australia won't be in a good place. So I'm not too upset about that.

SABRA LANE: Big business is disappointed the corporate tax cut's gone. The promise of a tax cut for just small business could mean a two-tiered tax system and the breach of the promise of lower, simpler, fairer taxes.

The Government is grappling with ways to deliver the cut, as most small businesses in Australia aren't incorporated - that means they don't pay company tax. It's also wrestling with the definition of what is a small business.

PETER STRONG, COUNCIL OF SMALL BUSINESS OF AUSTRALIA: If there's no real definition, we'll just end up with the same old story of only incorporated small businesses getting the tax break, which is $300,000, so they've got to come up with a solution and we're hearing that they're working on it.

SABRA LANE: The Council of Small Business of Australia's Peter Strong says there are better ways to boost small business and stimulate the economy to create jobs.

PETER STRONG: But the big one is the investment allowance and the increased depreciation. So we're talking about if you buy a photocopier for $1,000, you should be able to claim 130 per cent of that in depreciation immediately, which means you get $1,300 back. There's a motivator to go and spend money. And the more money that small business people are spending, the better it is for the economy.

SABRA LANE: Overnight the International Monetary Fund revised down its growth forecast for Australia, finding the economy would grow at 2.8 per cent this year, down a smidge from its last prediction six months ago.

The Treasurer Joe Hockey, who's currently in the United States for briefings about the world economy, says the IMF update underlines his resolve on budget repair.

JOE HOCKEY, TREASURER: So now we need to continue with our path back to surplus. It needs to be tempered a little to ensure that you don't have budget policy working in contravention of the direction of monetary policy. So, we're not going to have an arm wrestle between the Reserve Bank and The Commonwealth Treasury. We're going to get the balance right and we're going to focus on making it easier for households and better for business so they can employ more Australians.

LEIGH SALES: Sabra Lane reporting.