The administration of Prime Minister Julia Gillard unveils on Tuesday its first annual budget amid consumer fears of accelerating inflation and business concerns about a strong currency.

Spending cuts aimed at reining in domestic price increases, along with measures to create more jobs, are expected in the "tough budget" that Treasurer Wayne Swan will present to Parliament.

Tax breaks, via early tax offsets for eligible income brackets, will be a main strategy in the budget to help boost wage-earners' weekly pay packets, Mr Swan said on the eve of the budget presentation.

Although the treasurer expressed confidence that this measure would "assist those people who are doing it tough," critics see it as simply leading to added pressure on the budget deficit.

Mr Swan said a bigger fiscal shortfall could still be expected for the year ending on June 30, although better economic conditions and a surge in mining revenue could lead to a surplus in the 2012-2013 fiscal year.

The deficit for the current year could reach A$50 billion, according to official estimates, which represents an expansion over the A$41 billion projected at end-2010.

"Substantial savings" in the new budget, which will include cuts in civilian jobs in the military, are being targeted to lay the groundwork for a return to surplus, Mr Swan said.

Still, economists see the impact of a surging Australian dollar on such industries as manufacturing, retail and tourism will remain a challenge.

It does not help that the fiscal position has been weakened by poor corporate tax returns owing to the depressed business conditions caused by the heavy flooding in Queensland in February this year.

The budget unveiling comes amid a recent slump in the Gillard administration's popularity ratings.