Treasurer Wayne Swan is defending the growth forecasts in the federal government's mid-year budget review despite his own warnings of dark clouds looming overseas.
But he admits the world is not perfect when it comes to forecasting.
The Mid-Year Economic and Fiscal Outlook (MYEFO), released yesterday, forecasts growth this year and next of 3.25 per cent, lower than predicted in the May budget.
"What the Treasury does is makes its best judgment about the prospects for the year ahead, based on where we are at this point in time," Mr Swan told ABC Radio, adding the strength of Australia's domestic economic stood out in the world.
Some economists fear dimming global growth will impact on the local economy.
But the treasurer says the forecast takes into account a likely recession in Europe as well as growth in China being downgraded by "a little".
It was the same "trend growth" forecast as the Reserve Bank and international agencies, including the OECD.
Mr Swan is sticking to his goal of achieving a $1.5 billion surplus in 2012/13, despite having to upwardly revise the current year deficit from $22.6 billion to $37 billion.
While others have described the projected surplus as "wafer thin", the treasurer described it as modest.
"There is no doubt about that," he said.
Opposition treasury spokesman Joe Hockey says no one, except Mr Swan, seriously believes the government can deliver a budget surplus.
The MYEFO showed the government planned to spend $11 billion more during the next four years than was forecast in May's budget.
Those forward estimates did not include the annual $6.5 billion cost of a national disability insurance scheme or $36 billion for new submarines.
Mr Hockey described as "quite miraculous accounting" the government's decision to impose a one-off 2.5 per cent efficiency dividend on the public service.
The public service union says 3000 jobs will go as a result of the squeeze on government agencies.
The coalition has pledged to slash, by natural attrition, 12,000 jobs from the public service.
Mr Swan said the coalition planned to have a complete hiring freeze across the public service as well.
"They're being a little cute in comparing their policy to ours," he said, adding the coalition's policy was a blunt instrument.
The treasurer said the public sector had to be involved in economy-wide belt-tightening.
Mr Hockey suggested the coalition would support the decision to reduce the baby bonus payment from $5400 to $5000, despite his leader on Tuesday saying it was a "rip-off of the forgotten families of Australia".
The opposition had supported legislated spending cuts after the May budget, he said.
"We last time did not stand in the way of significant reductions in government expenditure as painful as it was," he said.
"It's a principle that we would apply again."
