ABC News director Gaven Morris says there is "no more fat to cut at the ABC", and an $84-million reduction in funding revealed in the federal budget will "cut into the muscle" at the broadcaster.

Tuesday's budget included a three-year freeze to the annual indexation of the ABC's operational funding, which effectively cuts $84 million from the organisation over that period.

Mr Morris said that comes on top of $254 million in cuts to the ABC's funding since 2014.

"Make no mistake, there is no more fat to cut at the ABC," he said. "Any more cuts to the ABC cut into the muscle of the organisation."

In a speech at the Melbourne Press Club, he said the ABC was the "most minutely scrutinised media organisation in Australia and every dollar we spend must be accounted for … it's absolutely as it should be".

He said Tuesday's funding announcement came as something of a surprise, and asked for time to work through what the effects might be.

But he said it would not be possible to implement the cuts without affecting output and staff.

"There is simply no way that we can achieve that without looking at content creation, and certainly looking at jobs within the organisation," he said.

"There are real consequences in an $84-million cut and there's no way around it."

Mr Morris said that almost 96 per cent of the news division's annual $202.4-million budget was spent on journalism and production.

He told the audience of media professionals the ABC's per capita funding is 34 per cent lower than the average of other public broadcasters.

"We serve a population one third the size of the UK, and yet we have one eighth the budget of the BBC," he said.

Mr Morris also outlined the ABC's Local Journalism Initiative, which he said would reposition the ABC's capital city newsrooms to deliver faster breaking news across platforms, as well as more in-depth coverage.

"We want our journalists in those newsrooms to have the time, the resources and the ability to do a stronger, bolder brand of journalism for state and territory audiences," he said.

The plan is expected to result in about 20 redundancies.

"Obviously as managers of the ABC it's never nice to be working through any sort of plan where people are going to be leaving us," Mr Morris said.

The budget papers say the freeze is being imposed to ensure the ABC continues to find back-office efficiencies.

But Mr Morris said ABC News was "lean", with only 4 per cent of the budget going to back-office functions and management.

"In 1987, your ABC famously, as you all recall, cost eight cents a day. In 1987 dollar terms, we now cost each Australian four cents a day.

"We're working more efficiently, using our resources better, as taxpayers would expect us to."

The cuts outlined in the federal budget will not be imposed until July, 2019.

The ABC is preparing its triennial funding submission for 2019-2022.