Treasurer Joe Hockey has been urged to reboot his budget and scrap the unpopular $7 GP co-payment, with former Liberal treasurer Peter Costello saying governments have to cut their losses.

The Treasurer is struggling to convince crossbenchers to back his budget, with key measures such as the Medicare co-payment and welfare changes facing defeat.

"The $7 co-payment ... it's just not going to happen, so let's move on," former treasurer Peter Costello says. Credit:Rob Homer

Mr Costello said the Coalition should "reboot the whole argument" by bringing forward the next intergenerational report, which highlights long-term pressures on government spending.

It should also dump measures unlikely to pass the Senate, he said.