Treasurer Joe Hockey says the federal government is increasing health spending, despite the states' concerns about cuts.
State premiers have called for an "emergency" meeting with Prime Minister Tony Abbott to discuss the federal budget's $80 billion in cuts to schools and hospitals.
But Mr Hockey told the National Press Club in Canberra on Wednesday that health spending would rise.
"We are going to keep increasing the funding of hospitals despite some of the commentary," Mr Hockey said.
"We've got to engage in one of Australia's great strengths and that is to build a health system that is the envy of the world, not just today, but in 20, 30, 40 years' time."
Mr Hockey said the new medical research fund and the GP co-payment represented "structural reform" of the health system.
Mr Hockey said without the new $120 billion infrastructure package in the budget there would be a "growth gap" within three years and unemployment would rise.
"We need to have cranes going all over the country," he said.
"That's what the PM said to me and we have to deliver."
New roads, rail, ports and airports would involve using the states' "lazy capital" to roll out productive infrastructure.
The assets would not go overseas but were more likely to be picked up by the major superannuation funds.
Mr Hockey said the paid parental leave scheme was not included in Tuesday's budget because the federal government was still in talks with the states on its roll out.
"We are negotiating the exact numbers with them," he said.
Mr Hockey said the Abbott government would honour the four-year agreements with the states on hospitals and schools.
But beyond that the funding allocation would depend on the outcome of two white paper reviews, into the federation and the taxation system.
He described as a "bonus pool" of funding the deals put in place by the Gillard and Rudd governments, which could only have continued via increased taxes.
"We do not run hospitals, we do not run schools - the states do," he said.
The treasurer said the government could achieve its aim of creating one million jobs over five years through the budget's economic growth package.
"Yes, we want to do that," he said, adding unemployment could "turn the corner" when it reached 6.25 per cent.
"I am encouraged by the 5.8 per cent we've seen over the last few months but there is still much work to be done," he said.
The key was to boost workforce participation through scheme such as the $10,000 for employers to put on an over-50 unemployed person.
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