Treasurer Wayne Swan will dip into the pockets of the rich to deliver Labor's first budget surplus in 13 years, arguing it is the right economic decision for the times and will ease the interest-rate squeeze on working families.
Mr Swan's fifth budget, to be handed down on May 8, comes as Labor seeks a boost over the coalition in the polls and Prime Minister Julia Gillard faces renewed leadership speculation over her handling of the Peter Slipper and Craig Thomson affairs.
The treasurer has the daunting task of turning an estimated $40 billion deficit in 2011/12 to a surplus of $1.5 billion in 2012/13, amid falling company tax revenues and rising demand for government services.
Mr Swan argues a surplus is appropriate for an economy returning to trend growth of 3.25 per cent and will be the nation's best defence against further global uncertainty.
He also hopes it will give the Reserve Bank of Australia, which cut official interest rates by a hefty 50 basis points a week ahead of the May 8 budget, the ability to keep rates low.
The treasurer has spent this year talking about Labor values - fairness and equality - and accusing some of the nation's richest people - such as miners Clive Palmer, Andrew Forrest and Gina Rinehart - of using their financial muscle to influence public policy debates.
The treasurer's budget plan will target the rich by doubling the tax rate on superannuation contributions, winding back tax concessions on living-away-from-home allowances, and means-testing the private health insurance rebate.
In line with his "Labor values" agenda, there will be start-up money for the National Disability Insurance Scheme (NDIS), a revamp of the aged-care system, incentives for employers to give over-50s a job, personal tax cuts for those earning less than $80,000 and increases in pensions, allowances and family payments as part of the clean-energy package.
Mr Swan will also bring forward some spending to 2012/13 and put off some spending on defence procurement and roads to 2013/14.
A possible boost to the public service "efficiency dividend" is on the cards, slashing an estimated 2800 public service jobs through voluntary redundancies and not filling vacant positions.
The federal opposition says it won't believe anything Mr Swan says about the surplus until the final budget outcome is released in late 2013, most likely after the next federal election.
The budget comes in a climate of uncertainty in the Australian economy with the retail, manufacturing, housing and construction sectors struggling, and the mining boom continuing apace in Western Australia and Queensland.
Business groups have called for the $23 per tonne fixed price on carbon emissions, which will affect almost 500 companies from July 1, to be put off until a global agreement on emissions trading is sealed.
But the government won't be swayed, and the budget will identify a range of measures under its Clean Energy Future plan to be funded by the carbon tax.
The minerals resource rent tax on iron ore and coal mega profits, which also starts on July 1, is expected to earn a net $3.7 billion in 2012/13, after handing small business a company tax cut.
Details of how this will be spent will be outlined in the budget, but the proceeds have been earmarked for infrastructure and administration of a rise in the superannuation guarantee.
The Australian Greens, which supported Labor to minority government, have sought an end to fuel rebates for the booming mining sector, saying the money would be better spent on dental care and education.
Welfare groups want a rise in the unemployment allowance, a national dental scheme and a growth fund to pay for public housing.
Peak union body ACTU says the priority is creating and protecting jobs and that shouldn't be derailed by the surplus goal.
They argue the government must support industries under siege from the high Australian dollar to transform and remain competitive.
Business groups are backing a corporate tax cut but also argue the government should be flexible on its vow to achieve a surplus if the situation in Europe deteriorates.