Workers will be waiting for a lift in real wages for two more years after the Albanese government's first budget warned inflation would outstrip pay growth until 2024/25.
Treasury predictions in the 2022/23 budget see the tight labour market pushing wages growth to 3.75 per cent in 2022/23 and 2023/24, before falling to 3.25 per cent in 2024/25.
By this time, inflation is expected to have simmered down from a likely 7.75 per cent peak later this year to 2.5 per cent - back within the Reserve Bank of Australia's target range - and below the pace of wages growth.
All going well, this will see Labor deliver on its election promise to get real wages moving about two years after taking office.
Strong employment as well as sky-high commodities prices have helped the Labor government land a deficit half the size forecasted in the former coalition government's budget announcement in March.
Treasurer Jim Chalmers' first budget handed down on Tuesday points to a smaller deficit than expected of $36.9 billion for 2022/23, less than half the $78 billion previously signalled.
But government finances will track deeper into the red over the forward estimates, as the temporary boost from commodities and high employment dries up and areas of unavoidable spending - such as the interest bill on debt and health care - continue to balloon.
Deficits are expected to swell to $44 billion in 2023/24, $51.3 billion in 2024/25 and then improve slightly to $49.6 billion in 2025/26.
The series of deficits will push the budget into more than $1 trillion worth of debt in the next financial year before swelling to $1.16 trillion by 2025/26.
Key commodity prices, such as iron ore, metallurgical coal and thermal coal, are expected to "glide down" during the December 2022 and March 2023 quarters toward more historically normal prices.
Delivering his budget address, Dr Chalmers told parliament the global economy was teetering on the edge of recession.
"But while we intend to avoid the worst of the turbulence from overseas, we cannot escape it completely," he said.
"Global challenges, along with high inflation and higher interest rates, will have an impact."
Treasury has downgraded its economic growth forecast since the coalition budget in March, with gross domestic product tipped to fall to 1.5 per cent in 2023/24 before starting to recover.
Growth is expected to lift by 2.25 per cent in 2024/25 and then 2.5 per cent in 2025/36, as per Treasury's forecasts.
"The hit to growth will have an effect on employment, but jobs will continue to be created, and unemployment is expected to stay low by historical standards," Dr Chalmers said.
Treasury's budget forecast for the jobless rate have been revised upwards from July estimates to peak at 4.5 per cent next financial year.
The department previously expected the jobless rate to peak at 4.25 per cent.
While the budget delivers on key election promises such as cheaper childcare and medicines, it emphasises restrained spending for fear of ratcheting up inflation further.
The treasurer pointed to a "budget repair package" that will deliver a $28.5 billion improvement in the bottom line over the forward estimates.
The "repair" includes the binning of coalition projects as well as minor tax reform, namely new measures to stop multinational tax avoidance.
Despite calls to scrap the stage three tax cuts, there was no new line item in the budget detailing their demise.
The government has also opted to bank 99 per cent of a likely temporary revenue boost from high commodity prices in 2022/23 as a budget repair measure.
Over the forward estimates, more than 90 per cent of tax upgrades will be returned to the budget rather than spent.
"This is just the beginning of our budget repair work, and it's just the beginning of the conversation we need to have as a country," Dr Chalmers said.
