Business leader and prominent Liberal Party supporter Tony Shepherd is warning the Federal Government not to go through with handing out tax cuts to households.

Key points: Business leader Tony Shepherd wants federal budget to focus on spending that will boost productivity

Business leader Tony Shepherd wants federal budget to focus on spending that will boost productivity He warns that you "cannot bank on luck" that has seen budget return to surplus on back of the resources sector

He warns that you "cannot bank on luck" that has seen budget return to surplus on back of the resources sector Mr Shepherd says a childcare focus could help grow economy with increased female participation

The Government has indicated it will announce billions of dollars' worth of tax cuts to low and middle income households at next weeks' budget.

"As the former chairman of the Audit Commission, I get the shivers on that," Mr Shepherd told The Business.

Mr Shepherd attracted widespread criticism as the architect of the Government's Commission of Audit, which was designed to help the Commonwealth "live within its means" and led to Tony Abbott's controversially harsh 2014 budget.

With the promise of the federal budget finally returning to surplus, Mr Shepherd is keen for the Government to preserve it, particularly with the economy starting to slow.

"We've been lucky in the last three years, got the budget back to surplus but that's on the back of the resources sector," he said.

But Mr Shepherd warns you "cannot bank luck", and is keen to see spending on worthwhile measures.

"If an international event occurred, which killed off our resources or reduced our exports, what have we got in reserve? We have a mountain of debt to pay back," he said.

"Tax cuts I am nervous about, but I would look at things that would help the productivity of the economy.

"Child care, huge cost for working families. Mum and dad both working very hard, how much money [do] they pay in child care? An enormous amount.

"We can grow the economy if we got up to 78 per cent of female participation — I think that's where I would focus it.

"If I was going to do benefits, I would look at things that encourage people to work and to lift the productivity."