The Government has slashed foreign aid by a further $3.7 billion to help pay for a boost in national security spending, in a move that has angered aid groups.

It means aid spending will return to levels seen during the Howard government, when the budget was in surplus, and grow in line with inflation.

The saving comes on top of the $7.6 billion shaved off foreign aid in the May budget.

Treasurer Joe Hockey confirmed the foreign aid cut was the largest saving in his Mid-Year Economic and Fiscal Outlook (MYEFO).

"Defence and national security commitments totalling $1.3 billion are more than offset by savings in our foreign aid budget of $3.7 billion," he said.

The peak body for aid agencies, the Australian Council For International Development (ACFID), condemned the "damaging" cuts.

ACFID's executive director, Marc Purcell, said it meant Australia's commitment to foreign aid as a percentage of national income would fall to its lowest level since records began in 1954.

"Today's cuts will hurt millions of poor people in the short term and pose an enormous risk to Australia's own economic and strategic interests in the long-term," Mr Purcell said.

"This is a damaging and short-sighted way to find budget savings."

CARE Australia chief executive Dr Julia Newton-Howes said the Government was using Australia's aid program as a "piggy bank".

"The Government has repeatedly emphasised the need for Australia's aid program to be more effective and well-planned," Dr Newton-Howes said.

"Continually raiding the aid budget to suit short-term needs is hardly effective, nor well-planned."

The cuts were foreshadowed by Foreign Minister Julie Bishop, who pre-emptively blamed Labor because it was opposing other savings measures in the Senate.

Shadow Treasurer Chris Bowen said he was concerned cutting foreign aid had been an easy target for the Government.

"The world's most vulnerable should not be those paying the price for the Government's loss of control of the federal budget," Mr Bowen said.