Prime Minister Tony Abbott has promised not to raise taxes to fund increased national security and Australia's involvement in Iraq.
Finance Minister Mathias Cormann refused over the weekend to rule out hitting taxpayers for the estimated $500 million a year in extra costs.
But Mr Abbott says it is manageable in the total budget of some $400 billion.
"This is a government that believes in lower taxes not higher taxes," Mr Abbott told reporters in Canberra on Tuesday.
"We will pay what we must to do our duty by our country and by the wider world."
Opposition Leader Bill Shorten said Mr Abbott does not have a good track record when making promises on tax increases.
"Labor will support the intervention in Iraq. But we will not support you slugging people because the government hasn't got any other ideas what to do," Mr Shorten said in Sydney.
With the additional burden of national security costs coming on top of several budget measures being held in limbo in the Senate, Mr Abbott was asked if the budget was in a worse position than when he came into government.
"It's honest today in a way that it was fundamentally dishonest when we came into government," Mr Abbott replied.
He aims to get the budget back in "broad balance" in 2017/18 with "careful and cautious" predictions and not inflated and optimistic predictions.
The budget papers forecast a deficit of $2.8 billion in 2017/18.
"We want the fiscal consolidation that needs to be achieved to be a real fiscal consolidation not a fantastical one," he said.
Mr Shorten believes the government's decisions had worsened the budget bottom line.
The government is still pushing policies like the paid parental leave scheme which everyone in Australia thinks is a stupid idea, Mr Shorten said.
"This government is out of touch with real Australia," he said.
However, Australian Chamber of Commerce and Industry boss Kate Carnell said squabbling over the budget is undermining business confidence in the broad economy.
"I think they are concerned that what is happening in the Senate at the moment with the budget where a lot of the saving measures are not going through," she told reporters in Canberra.
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