Federal Treasurer Joe Hockey's $845 million worth of cuts will be delivered mostly by trimming support payments to the auto and renewable energy sectors.
The government argues that assistance policies have failed, with employment in assisted sectors falling over the past decade, even as government funding increased.
Australian businesses are estimated to receive more than $10 billion in annual assistance from the federal government.
"We will refocus our effort on innovation and self-reliance," Mr Hockey said in his budget speech on Tuesday night.
"Businesses should stand or fall on their ability to produce the goods and services that people actually want."
Australia's three vehicle manufacturers, Holden, Ford and Toyota have announced they will stop manufacturing in Australia in the next three years.
But the government will be open its purse strings and spend more than $1.4 billion on boosting employment and skills, and help companies to become more competitive.
That includes $485 million to establish an Entrepreneurs' Infrastructure Programme to develop and commercialise business ideas and a $476 million fund to pay for skills training being sought by employers.
The government will offer loans of up to $20,000 to apprentices and will spend $50 million to pay manufacturers to shift to higher value and growth markets.
Industry minister Ian Macfarlane said the measures would help lift productive and make businesses more competitive.
"Our new policy direction will kick start the productivity and competitiveness of business and provide structural and strategic support enabling businesses to back themselves and carve their place in a changing global market," he said.
The government has also allocated $161 million for spending on science and research projects and will invest more than $125 million to support the resources and energy sectors.
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