KEVIN RUDD has left open the possibility of an early election if the Senate does not pass the budget and other key pieces of legislation.
The Prime Minister said last night he favours serving the full three-year term before going to the polls but he stressed he is equally committed to implementing the budget and other measures.
"My instincts on this … are conservative," he told the ABC's 7.30 Report.
"That is, I want to ensure that we are serving our full term but I'm equally mindful of the absolute importance of getting our legislative program through.
"The Senate has to be mindful of preserving the financial integrity of the budget."
The Government also threatened yesterday that the $14.1 billion for increasing the pension - including a $32 weekly rise for single pensioners - would depend on the budget being passed in its entirety, especially the $22.6 billion in savings measures.
"They need to understand that voting against the saves that we announced, to pay for the pension, is the same as voting against the pension rise itself," the Treasurer, Wayne Swan, said.
The next election is scheduled for late next year.
Mr Swan said: "The very last thing the economy in this country needs is an election.
"The first thing it needs is some common sense from all parties in the Senate."
The Opposition did not question yesterday, any specific savings measure which include cuts to superannuation concessions and means testing the private health insurance rebate.
This raised speculation it would pass the budget relatively unchanged.
A senior source said: "We're not going to be unreasonable".
It is understood the Coalition will badge its actions as necessary to lock in the budget as presented and prevent further deficit blow-outs caused by non-budgeted new spending or costly side-deals with the minor parties in the Senate.
The Coalition wants to avoid a double dissolution, which can be called if the Senate twice blocks the same piece of legislation three months apart.
The Government will today introduce legislation for its emissions trading scheme which all non-Labor Senate parties have vowed to block.
If blocked again later this year, this would be the most likely trigger should the Government decide to go early.
The Opposition Leader, Malcolm Turnbull, will give his budget reply speech tonight.
He focused the budget attacks yesterday on the $188 billion net debt that will be accrued by 2012-13, and the record deficit for next financial year of $57.6 billion.
He also slammed as fanciful the budget's optimistic recovery scenario with projections for economic growth to reach 4.5 per cent by 2011-12 and continue at that above-trend level for some years.
"Miracles do happen but not that often," Mr Turnbull said.
Mr Rudd and Mr Swan said the projections are conservative, realistic and based on growth patterns that occurred after previous recessions.
Mr Turnbull said the projections are suspect and at odds with the much slower recovery outlined by the International Monetary Fund in April.
Despite frequently using IMF predictions to back policy decisions, Mr Swan took a swipe at the body yesterday.
"Our Treasury has a far better hold and grip on these figures than they do," he said.
He inferred the IMF's forecasts were volatile by pointing out it had issued five downward revisions of the world economy since July.
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