Australian Prime Minister Tony Abbott has conceded he made a mistake by winking and smiling during a talk radio phone-in show while listening to an adult sex line worker complain about welfare cutbacks.

Mr Abbott, who is also Minister for Women, was caught winking at the host of an ABC Melbourne 774 radio show phone-in, after pensioner Gloria Warburton, claimed she has been forced to work for an adult sex line in order to survive.

She told the Prime Minister that she has "three chronic, incurable medical conditions, two life-threatening". The 67-year-old pensioner added that the budget reforms would cost her $850 Australian dollars (€575) a year, which she would be unable to afford.

Audibly upset, she said: "What do you suggest I cut out, Mr Abbott? Food, electricity, firewood, Christmas, birthday presents to my grandchildren? Or should we all just die and get out of your way?"

Abbott explained earlier today that he had been reacting to a smile from broadcaster Jon Faine, and should have been focusing on the caller.

The gesture was captured by a television camera and broadcast in national news bulletins as Abbott attempts to sell unpopular budget cutbacks, which have been slammed for being indicative of his conservative government’s lack of empathy for the poor.

This isn’t the first time the gaffe-prone politician has come under scrutiny. In 2011, when in opposition, he was forced to defend his comment that "sometimes shit happens" when discussing the events surrounding the death of a digger in Afghanistan.

Watch his response to a reporter's questions over his remarks: