Crossbench senators say they are not convinced by Treasurer Scott Morrison's call to back his full company tax-cut plan, following the release of the mid-year budget update.
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Mr Morrison said the budget update, which showed the federal deficit would grow by an extra $10.4 billion, soft wages growth and real GDP forecasts revised down, underscored the need for company tax cuts to grow the economy - at least for businesses with a turnover of up to $10 million.
"We have to continue to grow the economy and drive investment. And to drive investment, we believe it's necessary for businesses, particularly small and medium-sized businesses – at least up to $10 million in turnover a year – [to have] headroom so they can give people more hours," he said, in a sign the Treasurer is sharpening his focus on the needs of small business.
"You've got to grow the economy and you don't grow the economy by taxing it more."
In May, the government announced a $50 billion plan to cut company taxes to 25 per cent over 10 years for all business that would, according to Treasury, deliver an additional 1 per cent of GDP growth over 20 years.
The company tax-cut plan will top of the government's agenda in 2017 when Parliament returns.
But NXT Senate leader Nick Xenophon, who commands three votes in the upper house, said the mid-year budget update had not changed his mind and he would not - at this stage - back a cut for businesses with a turnover of more than $10 million.
"Right now this [negotiations with the government] is like a big Rubik's cube and the pieces are nowhere near lining up," he said.
"It's what MYEFO [the mid-year economic and fiscal outlook] didn't say or do that is important. The hidden story is there is no plan B for the auto sector in this country and the tens of thousands of jobs at risk with the exit of Holden and Ford.MYEFO made the case for an industry policy that works and makes sense.
"Before we can even talk about company tax cuts, I need to see what evidence there is of an industry policy that will boost horticulture, advanced manufacturing, food processing across the whole country."
Fellow crossbench senator Derryn Hinch acknowledged the tax cut was a government election promise "but let's see the actual legislation".
"Let's see how far [US President-elect Donald] Trump [who has promised a 15 per cent tax rate] goes and Britain . . . any cuts have to be coupled with crackdown on offshore rorts."
A spokesman for Pauline Hanson's One Nation said the party's leader had not changed her position of backing tax cuts for business with a turnover of up to $50 million following MYEFO.
Without the support of the Greens and Labor, who oppose cutting taxes for businesses with a turnover above $2 million, the government will have to win the support of the Xenophon and Hanson teams, as well as a handful of the independent crossbenchers in the Senate.
Ratings agency Moody's, meanwhile, released a note on Tuesday that predicted budget deficits would "remain wider for longer than the government projects".
However, the agency said that Australia's debt burden remained moderate, praised the decision to revise down growth forecasts and the "fiscally prudent" decision to assume commodity prices would fall from recent highs, which will further reduce government revenue over the next four years.
"We expect that budget deficits will be somewhat wider for longer than the government currently projects. We forecast gross general government debt to rise to 41.9 per cent of GDP in 2018, remaining broadly in line with the median for AAA-rated sovereigns," the agency said.
Moody's, along with Standard & Poors and Fitch, re-affirmed Australia's AAA rating on Monday, though with warnings to government that it must continue to reduce the federal deficit.
