Tuesday’s financial statement will be guided by principles of fairness, opportunity and security, treasurer says

Scott Morrison warns of spending cuts to pay for budget health and education fixes

Scott Morrison has warned that the government will have “to pay for” increased spending in Tuesday’s budget with corresponding savings elsewhere.

The treasurer’s comments to Channel Nine on Sunday suggest that the Coalition’s efforts to reverse unpopular cuts in the 2014 budget, through increased spending on schools and the anticipated unfreezing of the Medicare rebate, will require cuts in other areas.

Morrison and the finance minister, Mathias Cormann, have also not ruled out further revenue-raising measures, amid reports the government is considering extending the Medicare levy surcharge.

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In a Sunday interview with Laurie Oakes, Morrison empathised with families who he said were facing price rises and “are under a lot of stress because they haven’t seen the wages going up”.

He said the budget would reflect that there are “better days ahead” and would be guided by the principles of fairness, opportunity and security.

The government is hoping to use Tuesday’s budget to finally draw a line under the harsh austerity of the 2014 budget, including by ditching more than $10bn of unlegislated cuts.

On Tuesday the government announced a $2bn boost to schools’ funding over four years and is expected in the budget to commit to unfreezing the Medicare rebate after Labor’s potent campaign on health in the 2016 election.

The budget is expected to contain a housing affordability package, including restructuring the national affordable housing agreement and helping first homebuyers accumulate deposits, and increased infrastructure spending including for inland rail and Badgerys Creek airport.

Morrison confirmed the budget will contain $75 payments for single parents and single pensioners and $125 for couples on pensions to be paid by 30 June, part of a deal struck with Nick Xenophon to compensate them for power price rises.

He said the health minister, Greg Hunt, had been consulting doctors and health professionals since his appointment in January and the government had been “working hard on ensuring that we can provide the support in this budget for a healthy Australia”.

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The treasurer said the budget was about making “the right choices” and since the global economy was showing encouraging signs of recovery the Australian government should aim to grow the economy and “ensure the services that Australians rely on”.

“And Medicare and the [pharmaceutical benefits scheme] are critical services. So we’ve been doing lot of work on that area.”

Asked if the Medicare levy surcharge would be extended to those with private health insurance, Morrison refused to comment on “speculation”.

He said in the budget he would be “addressing the needs of hard-working Australians”, repeating the Coalition’s 2016 election mantra that it would help deliver “jobs and growth”.

Asked if the government had scaled back its ambitions on housing affordability, Morrison said he did not resile from the expectation the budget would help the homeless, renters and those saving to buy a house.

“I don’t agree with the cynics that says the commonwealth government can’t make a difference in this area,” he said.

Asked if anyone would feel the pain of budget cuts, Morrison replied: “You’ve got to pay for what you spend.

“All of our budgets as a Coalition have always met any additions in expenditure with budget improvements otherwise.”

On ABC’s Insiders the shadow treasurer, Chris Bowen, said increased spending in health and education meant the government was “adopting pale imitation of Labor policy in an attempt to save Malcolm Turnbull’s leadership”.

He said the government was “trying to close down issues” that Labor had campaigned on while “giving up the fight on the deficit”.

“The team that brought you the debt-and-deficit disaster is now bringing you good and bad debt,” he said in reference to the government’s plan to separately account for debt that is used to pay for capital and infrastructure.

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Bowen said Labor would not give the government a “pat on the back” for a “partial backdown” on unfreezing the Medicare rebate or its education policy which still spends $22bn less than Labor had proposed over a decade.

He said Labor would examine any proposal to extend the Medicare levy surcharge but labelled it a tax increase that contradicted the Coalition’s earlier message that the budget did not have a revenue problem.

In an earlier interview on Sky News, Cormann refused to rule out that the 9 May budget would contain tax increases.

Cormann confirmed a report that the government would deliver a $2.3bn road and rail infrastructure package to Western Australia, including by redirecting $1.2bn originally slated for the Perth Freight Link to other road projects and the Metronet rail project that was the centrepiece of WA Labor’s successful election pitch.

A report in the Sunday Telegraph suggested the government was also set to spend $350m on veterans in the budget.