Budget of 'increased taxes' unites Labor

PM Tony Abbott appears to have backed away from his threat to hold a double dissolution election. Source: AAP

AUSTRALIANS are listening to the Abbott government but some may be confused about what they're hearing, the prime minister says.

Admitting his first budget includes "increased taxes" in one interview, Tony Abbott in another pointed to selective listening for confusion about pre-election promises.

"Well, I know that people hear different things," he told ABC's Insiders TV program.

Mr Abbott spent another day on Sunday defending his budget, which includes a Medicare co-payment, pension cuts and a fuel excise rise.

Labor are using the budget as the linchpin for a new united front, with Opposition Leader Bill Shorten telling party members the budget had brought Labor together.

"This terrible budget of the Abbott government, it has defined the Labor party," he told the annual Australian Labor Party conference in Melbourne on Sunday.

"Friends, the Labor party nationally has its voice back."

His comments came just hours before state and territory leaders commenced an emergency meeting in Sydney to discuss an $80 billion hole in state funding, left by last week's budget.

Mr Shorten accused the government of using cuts to state funding for schools and hospitals to sneak in another tax.

"They are actually increasing taxes through the back door," he told party members.

The states will have no choice but to raise GST because they must continue to operate schools and hospitals, he said.

Labor call it blackmailing, a line echoed by the Greens.

Mr Abbott says it's about ending handouts the government can't afford.

"What I've got to do is ensure that at the Commonwealth level, we are not living beyond our means, we're not mortgaging our future and piling up never-ending debt for our children and grandchildren," he told Fairfax radio.

But if a tax conversation was what Mr Abbott was after, the states refused to play along and shot down suggestions GST or income tax hikes were on the agenda at Sunday's meeting.

They instead joined forces to call for an urgent Council of Australian Governments meeting before July 1.

The latest Galaxy poll, published by News Corporation on Sunday, found 75 per cent think they will be worse off as a result of the budget.

Thousands of protesters rallied in capital cities to voice that view.

But Mr Abbott says the budget is in line with what his government promised, including stopping the boats, scrapping the carbon tax, building roads and taking control of the budget.

"I don't want to plead the fine print but I do believe that we have fundamentally kept faith with people," he said.

He said everyone must share the burden caused by Labor "spending like a drunken sailor".

Labor's fury is directed at doctor co-payments, a raised pension age, restrictions on unemployment benefits, cuts to state funding and the fuel excise - measures it will oppose.

Abbott's "juvenile" paid parental scheme is also high on Mr Shorten's hit list, with the Labor leader claiming it will pay millionaires $50,000 of money they don't need.

"See how that goes for pensioners trying to get an extra smear of vegemite on their toast on day 13 of their budget," he said.

The Greens and Palmer United Party also oppose several measures, meaning Mr Abbott has some tough conversations to get the harshest of his budget measures through the Senate.

But the prime minister appears to have backed away from his threat to hold a double dissolution election over the budget, saying the crossbenchers would understand its harsher measures.

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