Govt is 'holding budget hostage to Europe'

The government has deferred a $1.59 a week tax cut because of the falling global carbon price. Source: AAP

THE federal government is holding Australian policy hostage to European decisions when it should be looking toward Asia, the coalition says.

Climate Change Minister Greg Combet on Wednesday said carbon price forecasts would be revised down in next Tuesday's budget because of a slump in the European market and related tax cuts would be deferred.

Opposition Leader Tony Abbott said the government was wrong to hinge domestic budget decisions on what happens in Europe.

"This is a government that talks about living in the Asian century, yet they gave economic policy-making in Australia over to the Europeans," Mr Abbott told reporters in Sydney on Wednesday afternoon.

"It's an absolutely bizarre decision and it shows why this whole carbon tax apparatus should just be gotten rid of in the interests of the security of Australian jobs and the welfare of Australian families."

Shadow treasurer Joe Hockey said the government had "subcontracted out" the fate of the Australian budget to Europe.

"This is a moment when we should be moving away from European policy-making rather than linking ourselves with it - no wonder our budget's a mess, and no wonder the carbon revenues are guessable," he said.

Australia's carbon price is currently fixed at $23 a tonne but in 2015 will move to a market-based mechanism linked to the European emissions trading system.

Tax cuts that were due to kick in then will now be deferred, Mr Combet said.

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