Mr Swan blamed the deficit on Australia's declining tax receipts following the Global Financial Crisis and declared the increase in budget spending would create a "stronger economy for all Australians".
"Australia's economy is in transition. We are moving from a period of short-term softness caused by natural disasters and a patchwork economy to a period of longer-term strength as the mining investment boom gathers pace," said Mr Swan.
"The Government will return the budget to surplus in 2012-13 to ensure we are not adding to the inflation and cost-of-living pressures that this investment boom will bring.
"The Budget will build a bigger workforce through better and more targeted investments in skills and training, and measures to encourage participation.
"We'll also deliver substantial new investments in mental health services, and build on our achievements in providing better education and health services for the Australian people," he said.
"Importantly, the Budget will recognise cost-of-living pressures by delivering on a range of commitments to help with family budgets, and will provide tax relief to help small businesses.
"The Budget delivers an unprecedented series of investments in regional Australia, including $1.8 billion for health and $500 million for education.
"We will deliver on these priorities while supporting communities affected by the recent natural disasters, meeting our election commitments and returning the Budget to surplus as planned.
"In these ways, among many others, the 2011-12 Budget will build a stronger economy for all Australians," said the Treasurer.
The Federal Opposition has focused its criticism on the levels of debt, inflation forecasts and what it claims is the government's failure to ease cost of living pressures on families.
Shadow Treasurer, Joes Hockey, said "this Budget confirms how out of touch Julia Gillard and Wayne Swan are with Australian families. It fails the essential test: to ease the cost of living on Australians who face higher prices every day.
"There is nothing in this Budget for Australian families doing it tough. All this Budget delivers is more deficit, more debt and more spin.
"The government's failure to rein in its wasteful and reckless spending will lead to higher inflation and higher interest rates," he said.
"This year's Budget deficit has soared to $49.4 billion and the forecast deficit in 2011/12 has blown out by $9.6 billion to $22.6 billion. With Australia's terms of trade at their highest level in more than a century, the budget bottom line should be in a much healthier state.
"Net government debt has climbed to a record $107 billion in 2011/12 and is forecast to remain above $100 billion across the forward estimates. This amounts to more than $4700 for every Australian.
"By 2014/15 the Government will be spending $7.5 billion a year or around $20 million a day on interest payments," said Mr Hockey.
It is expected non-government organisations and community groups will respond to the budget over coming days.