TREASURER Wayne Swan has warned major economies against leaning toward "mindless austerity" to repair their balance sheets, as Labor prepares for its own tough budget choices.
Mr Swan is in Washington this week for the spring round of top level Group of 20 industrialised nations and International Monetary Fund meetings.
In an economic note published on Friday, he said governments around the world, including Australia, faced difficult choices due to weaker world growth, following the 2008-2009 global financial crisis.
"While Australia faces these challenges from an enviable position of strength, we face significant revenue write-downs in part due to a stubbornly high dollar and competitive pressure on our industries, which have contributed to lower profits and subdued price growth across the board," Mr Swan said.
"This means we're having to make tough decisions."
There's fears the federal budget could be facing a multi-billion dollar black hole after Europe's carbon price plummet this week.
Mr Swan reiterated jobs and growth would be at the forefront of any decisions.
"To cut to the bone - as our political opponents advocate - would drive our economy into the ground and send unemployment skywards," he said.
"We now see countries with very weak economies falling into the trap of mindless austerity, when they should be trying to provide support to activity in the short term while improving fiscal sustainability in the medium term."
Mr Swan, who left Australia on Thursday, is due to attend meetings with G20 finance ministers and central bank governors in Washington.
He will also sit down with US central bank chairman Ben Bernanke and new US Treasury Secretary Jack Lew and have talks with European Central Bank president Mario Draghi and new Chinese Finance Minister Lou Jiwei.