The Abbott government has warned of spending cuts to come as the federal government grapples with its budget blowout.
The latest budget update shows the federal budget could remain in deficit for the next decade and drive national debt to two-thirds of a trillion dollars.
Treasurer Hockey says Australians will need to adjust their expectations of government spending.
Mr Hockey was making the case for broad-based savings, which will come in next year's budget, against a backdrop of weaker economic growth and higher unemployment for a number of years.
"Returning the budget to sustainable surpluses will not be achieved by piecemeal savings here and there," Mr Hockey told the National Press Club inCanberra.
"All options are on the table."
Multicultural grants axed
In the firing line is the multicultural grants scheme, which the federal government has confirmed will be axed in July next year.
The Building Multicultural Communities Program was launched by the former Labor government to provide one-off funding to community groups and local government bodies working to encourage social cohesion.
Last week, SBS reported the federal government planned to scrap the grants because of "the current state of the federal budget".
Nearly $5 million was first allocated to the program for 2013-14 - the amount later increased to about $14 million.
Today's Mid-year Economic and Fiscal Outlook (MYEFO) shows the Coalition government has cut more than $11 million out of the program for the current financial year, with no plans for it to continue into 2014-15.
Listen: Multicultural grants will be axed, Kristina Kukolja reports
Opposition spokeswoman for Multicultural Affairs, Michelle Rowland, says the Government should honour payments for more than 400 groups that have already been approved for financial assistance.
"These were funds that were fully budgeted in the May budget this year and they had been approved," she said.
"They had actually been tabled in parliament by the relevant minister and I think that it is astounding now that we've had the MYEFO announcement confirming the cessation of the program when even up to a week ago, I know first hand of community groups who were told, "Just wait and see. Wait and see."
Indigenous legal aid to be cut by $13.4 million, NITV News reports
The biggest blow to Indigenous funding was to legal aid - $13.4 million will be taken out of the sector over the next four years.
The federal government says the cuts will only apply to the policy reform and advocacy arms but during Senate Estimates the Attorney General's Department confirmed there was no way they would know just how it would affect frontline services.
Government needs to take responsibility for deficit: Oppn
There is no immediate sign the budget will return to surplus, after the previous forecast for a $4.2 billion surplus in 2016/17 was wiped out.
Shadow treasurer Chris Bowen said Mr Hockey should have outlined a path back to surplus.
"Joe Hockey is softening up the Australian people," Mr Bowen said.
"He is preparing the ground for deep and brutal cuts come budget time."
The budget deterioration reflects two key factors: a softer economic outlook and steps taken by the coalition to address unresolved issues inherited from the former Labor government, such as the $8.8 billion recapitalisation of the Reserve Bank of Australia.
The budget deterioration reflects two key factors: a softer economic outlook and steps taken by the coalition to address unresolved issues inherited from the former Labor government, such as the $8.8 billion recapitalisation of the Reserve Bank of Australia.
Unemployment is forecast to be six per cent by mid-2014, but rising to 6.25 per cent in 2016/17. The jobless rate is now 5.8 per cent.
Government debt is also expected to rise, from $320 billion this year to $460 billion by 2016/17, and a staggering $667 billion by 2023/24.
Australian Chamber of Commerce and Industry chief executive Peter Anderson said the figures were alarming.
"The only true solution to this alarming cycle of debt and deficit is for the government to provide the private sector with more economic freedom and a fairer deal to create the wealth required to get us out of this budget hole," he said.
