Jim Chalmers has paved the way for more difficult decisions after handing down his first budget.
The treasurer said tough conversations are needed to rein in debt during global economic uncertainty.
Households are also facing higher power prices, with a 50 per cent rise in retail electricity prices forecast over the next two years.
Dr Chalmers said the government was exercising restraint in cost-of-living relief to avoid adding to rising inflation, which is tipped to peak at 7.75 per cent by the end of the year.
"Everything needs to make a contribution, when you're climbing a mountain of this height, you need to start somewhere and that's what we did," he told the ABC.
"We've got an issue in the budget, we've got big, persistent structural spending pressure in the budget, that means we've inherited a budget in structural deficit."
While the budget papers showed a better than expected deficit for 2022/23 of $36.9 billion, the deficit is on track to blow out to $51.3 billion in 2024/25.
The economy is forecast to grow by 3.25 per cent this financial year, but growth will slow to just 1.5 per cent next year.
Dr Chalmers warned bigger spending pressures on the budget were set to increase.
"In the longer term, there's a bigger job to do, to put the budget on a more sustainable path," he said.
"This is just the beginning of our budget repair work, and it's just the beginning of the conversation we need to have as a country."
The budget foreshadowed power prices would rise by 20 per cent this financial year, before increasing a further 30 per cent the following year.
The treasurer said the government would consider regulatory steps to ease power prices.
"This pressure is coming from a busted energy market around the world, a consequence of the war in Ukraine," he said.
"But the consequences of that are being borne around the kitchen table. And we won't ignore that."
In cost-of-living measures, child care will be made cheaper for 1.26 million people, while more than $530 million will be spent expanding paid parental leave to 26 weeks by 2026.
An extra $787 million has also been set aside to reduce co-payments for the Pharmaceutical Benefits Scheme, while money has been allocated to support pay rises for low-paid workers.
The budget delivered on a number of key Labor election promises.
A national housing accord has set a target of one million new homes to be built over the next five years.
The NDIS will also be boosted by an extra $8.8 billion over the next four years, while $235 million will be spent on urgent care clinics and $750 million to strengthen Medicare.
Dr Chalmers said the disability insurance scheme could rise in cost to hundreds of billions of dollars each year.
"We want to make sure that people are at the centre of the NDIS. We want to do the right thing by Australians with a disability," he said.
"That means making sure that spending in the program is sustainable."
© AAP 2022