Abbott defends tough decisions

Prime Minister Tony Abbott says Australia needs to be candid about the challenges it faces.

Prime Minister Tony Abbott has warned that Australia can't wait for a crisis to deal with its debt. (AAP)

Prime Minister Tony Abbott has warned Australia can't wait for a crisis like Europe to deal with debt and deficit challenges.

Mr Abbott is laying out the government's agenda for 2015 in a keynote speech at the National Press Club in Canberra, which is seen as a major test of his leadership after the devastating Queensland election.

He defended unpopular decisions taken by his government as its standing with voters plummeted in the opinion polls.

Citing tens of billions of dollars in debt and deficit facing the taxpayer, he said Australia needed to be candid about the challenges ahead.

"We can't wait for a crisis - like Europe - to address this problem because the solutions then will be much worse than the solutions today," Mr Abbott said.

He said that over the summer he had spoken to colleagues and hundreds of Australians from all walks of life.

"In the street, on the beach, in cafes, even at the pub," he said.