Labor's Treasury spokesman Wayne Swan says families will need every cent of the relief to cope with the triple whammy of interest rate rises, record petrol prices and an attack on wages under the new industrial relations laws.
"The only plan Peter Costello has to help middle Australia pay more for fuel and pay more for interest rates is to give them some of their own money back," Mr Swan said.
"Short term tax relief is welcome but in tonight's budget there is no long term plan to protect Australian families from higher interest rates."
Labor unsuccessfully tried to block last year's budget tax cuts, which were aimed at high income earners. But Mr Swan indicated that Labor would not oppose this year's across-the-board cuts.
Skills shortage
However Mr Swan said Mr Costello had no plan for dealing with the country's skills shortage, its crumbling roads, rail and port systems or the child care shortage.
He told ABC television that the budget failed to deliver a program for long term prosperity because it didn’t deal with productivity with government more concerned about cutting entitlements rather than education of the workforce.
"Closing your eyes doesn't make the threats to Australia's economy disappear. But listening to Peter Costello tonight, he obviously hopes it will," he said.
"In his 4,046-word speech Peter Costello did not mention four of the biggest challenges to the Australian economy. He failed to utter the words productivity, participation, education or the current account deficit even once.”
Democrats: nothing for education
The Australian Democrats say budget is all about winning votes, rather than planning for the future of the nation.
Australian Democrats leader Lyn Allison says that by handing out tax cuts to all, the government is simply trying to win votes in the lead-up to the next election.
"There's not much here that's about nation-building or for future generations," she said.
"This is more about winning votes for the coalition than it is about long-term planning. It's not very equitable, we're seeing the biggest tax cuts for the highest income earners. The government has again handed small amounts of money to people in the hope of getting their vote."
Senator Allison said that for the first time, there is very little money in the budget for education.
Greens: wasted opportunity
The Australian Greens described the budget as a wasted opportunity that will increase the gap between rich and poor Australians.
Australian Greens leader Bob Brown says the budget is unfair.
"This government is squandering an opportunity for this great country of ours," he said.
"This budget will increase the gap between rich and poor, it's accelerating wealth at the top end in this country while failing to provide for the future.
"What the government says is, `Well we'll allow the already wealthy to get the windfall rather than putting it into education, the environment and those people that nurture and care for Australians who are down on their luck. It's a budget for your wealthy, for your advantaged."
Bracks attacks road funding
Victorian Premier Steve Bracks has attacked the federal budget, saying it’s robbed his state of road funding.
Mr Bracks said Victorians had been "robbed on roads" and that road projects in New South Wales and Queensland received funding but Victoria had been ignored.
He also said that despite the overall pool of GST money increasing, Victorians could expect little more GST revenue.
"The figures remain largely unchanged on previous years and show that increases in petrol prices do not lead to higher GST revenue for the states," he said.
Ageing underfunded
New South Wales Treasurer, Michael Costa says Mr Costello has failed to use the budget to reform the tax system to cope with Australia's ageing population.
Mr Costa said NSW's health and social security budgets have grown by about 7.5 per cent a year over the past five years, but total revenue has only grown by 4.8 per cent a year over the same period.
"The budget should have provided funding certainty for the state governments that deliver these services by reforming the fiscal arrangements between Canberra and the state capitals," he said.
"Instead, the federal treasurer has squibbed and provided relief for bracket creep disguised as tax cuts."