A respected economist expects Treasurer Josh Frydenberg will hand down a much improved budget bottom line after Australia's strong economic recovery from COVID-19 and a commodity boom caused by war in Ukraine.
But Chris Richardson is against handouts to ease cost of living pressures, saying they will only fuel inflation and bring forward an interest rate hike by the Reserve Bank of Australia.
The Deloitte Access Economics economist expects budget deficits will be almost $90 billion smaller over the next four financial years when compared to the mid-year review released in December.
"We are getting a COVID recovery and a commodity boom, the biggest really that we have had," Mr Richardson told AAP.
"The deficit is already back in a range Australia has seen often before."
For the 2021/22 financial year he is forecasting a deficit of $68.8 billion compared to the $99.2 billion predicted in December.
Similarly, he puts the deficit for 2022/23 at $67 billion rather than 98.9 billion.
However he warns the Treasury numbers have yet to forecast the full impact of defence and social services spending in the future, such as on the National Disability Insurance Scheme.
"The fact the world is a more dangerous place is going to be reflected in Australia spending more on defence, and that has to happen," Mr Richardson said.
Even so, in his respected twice-yearly Budget Monitor he still believes budget repair could be achieve by saving $40 billion a year over four or five years without weighing much on the economic outlook.
But he said the tricky bit is the politics.
"Neither side of politics will talk about this challenge - certainly not this side of the election and probably not afterwards either," he said.
There has been much speculation Mr Frydenberg might extend the low and middle income tax offset for another year in his March 29 budget, which comes just weeks out from the federal election due in May.
But Mr Richardson described it as middle class welfare, despite the name of the tax benefit.
"It goes to lower and middle income taxpayers and that is a totally different beast from low and middle income earners," he said.
He said around half of Australian adults don't pay personal tax because they are retired, unemployed, students, disabled, raising their kids or working but not making much money.
A tax cut at a time of a strong economy would just add to inflation, making the Reserve Bank more worried and forcing it to raise the cash rate earlier than would otherwise be the case.
He is also against cutting fuel excise at a time of high petrol prices, saying "these bandaids go on fast but come off slow".
DELOITTE ACCESS ECONOMICS BUDGET DEFICIT FORECASTS
(Forecast versus Treasury's prediction in December)
2021/22 - $67.8 billion versus $99.2 billion
2022/23 - $67 billion versus $98.9 billion
2023/24 - $65.5 billion versus $84.5 billion
2024/25 - $51.1 billion versus $57.5 billion.
