Nations keep watch on the eurozone crisis, wary that the region's further deterioration could impact on their economies but for an Australian economics professor, the continent's financial stress could prompt for a lower borrowing cost in Australia.

Professor Warwick McKibbin of the Australian National University told The Wall Street Journal on Thursday that at least the Reserve Bank of Australia (RBA) will be compelled to further slash the country's cash rate once the situation in Europe slides further.

While those servicing debts may get reprieves, the domestic economy will suffer as Euro economies cough up more woes, according to Professor McKibbin, who also served in the RBA board for more than 10 years.

Specifically, Prime Minister Julia Gillard and her Treasurer, Wayne Swan, will have to reengineer their budget plan for the financial year 2012-2013, or worst the government may have to take back its vow of realising a budget surplus of at least $1.5 billion.

The best the government can do, under such circumstances, is to simply improve on its previous deficit of more than $44 billion, the former RBA official said.

The planned surplus, to begin with, was ill-advised and "badly timed because it is a massive fiscal consolidation," Professor McKibbin said.

To avert further financial catastrophe, Mr Swan would serve the country best to if he has a Plan B - that is to rework the budget when the general economic condition calls for its, the professor said.

His sentiments echoed the complaints aired by the business community against the Labor-led government's budget blueprint, which it claims weighs too heavily on an economic setting already dealing with bleak prospects.

Ms Gillard also argued that her promised surplus would provide the RBA more flexibility to implement easing measures by reducing the country's interest rate, which this month was pushed down by 50-basis-point to 3.75 percent, still among the highest in major developed economies.

However, Professor McKibbin said that with or without the planned surplus by the government, the RBA will have to cutback on Australia's borrowing costs, especially in the event that the ailing Greek economy will have to depart from the eurozone.

Such event will spark structural reforms on the part of the European Community and the rest will have to contend with the succeeding adjustments, with Australia necessitating the embrace of a 'fairly low' cash rate, the ANU professor said.

His comments were made as the federal government stepped up its campaign of justifying the surplus fixation, which Treasury Secretary Martin Parkinson described this week as a fiscal consolidation that "is happening in a far healthier economic environment than the circumstances facing many other advanced economies at present."

The adjustments include the scrapping of many federal expenditures and the setting aside of company tax breaks, earlier pledged to sustain business expansions, with the government allocating more welfare payments to families deemed struggling under the present situation.

But consolidating at a time of great uncertainties in Europe, which recently saw its leaders being replaced by anti-austerity politicians, will only lead to growth cutbacks in Australia of up to one percent, Professor McKibbin reminded the country's economic managers.