Back in the red, no second surplus in budget update

Treasurer Jim Chalmers says a "really substantial improvement in the bottom line" can be anticipated, but federal finances are still expected to sink back into the red in the 2023/24 financial year after posting a record $22 billion surplus in 2022/23.

Fresh forecasts will be contained in the Mid-Year Economic and Fiscal Outlook due in December.

"They should expect to see a really substantial improvement in the bottom line, but we're not yet forecasting that second surplus," Dr Chalmers told ABC radio.

Yet Commonwealth Bank is tipping a $20 billion budget surplus for the financial year because of a higher-than-expected tax take.

Deloitte Access Economics expects a slimmer surplus of $2.4 billion.

Partner Cathryn Lee said the mid-year update would likely reveal $70 billion worth of additional revenue over the next four years compared to what was forecast in May.

"Treasury's commodity price assumptions are likely to be conservative, leading to upward revisions in company taxes," Ms Lee said.

"High inflation, a strong labour market and a surging population are likely to grow the personal income tax base beyond expectations."

The economic group then has the budget returning to deficits in the following years, though likely smaller than estimated before.

The federal budget is widely expected to come under pressure over the longer term from growing areas of spending, such as health, aged care and defence

A report from the Organisation for Economic Co-operation and Development released on Thursday outlined some options for improving Australia's long-term budget position, such as squeezing more out of the goods and services tax.

The Paris-based think tank also walked through a range of short-term projections for the Australian economy, including its expectation the Reserve Bank had reached the end of its interest rate hiking cycle.

"The projections assume that the cash rate will be held at this restrictive level until inflation is clearly declining to the target band, with 75 basis points of interest rate cuts assumed between the third quarter of 2024 and end-2025," the report read.

As higher interest rates and cost of living pressures weigh on the economy, the organisation is tipping Australia's growth to slow from 1.9 per cent in 2023 to 1.4 per cent in 2024.

Inflation has been moderating and the OECD expects it to return to the RBA's two-three target band by early 2025.

Opposition treasury spokesman Angus Taylor said Australia was at the "back of the pack" in dealing with inflation compared with other economies.

"We have amongst the highest levels of inflation of any advanced country and indeed we've seen the sharpest drop in household disposable income ... of any advanced country in the world," he told ABC radio.

Australia is due to get its September quarter update on economic activity next week.

The Australian Bureau of Statistics on Thursday released some of the data components that feed through into gross domestic product, including construction work done which was up 1.3 per cent.

The bureau said total private new capital expenditure lifted 0.6 per cent with equipment and machinery investment growing 0.5 per cent.

Australian Associated Press