Treasurer Joe Hockey has fended off questions about his troubled budget strategy, insisting he has a "steely determination" to keep making difficult decisions despite reports the government has abandoned the search for big savings in its next budget.

Mr Hockey was briefed on the state of the global economy this week by Reserve Bank governor Glenn Stevens and Treasury secretary John Fraser, and was told about significant economic problems in Europe that threaten Australia's economy.

Speaking on Thursday, Mr Hockey admitted a huge write-down in iron ore prices, weaker-than-expected economic growth and an expected increase in unemployment will hit government revenue much harder than predicted.

The shock could add another $40 billion to the government's budget deficit over the next four years and increase pressure to find new savings in its May budget.