Federal Treasurer Josh Frydenberg will still be on track for Australia's first budget surplus in a decade when he hands down his mid-year budget review, but it may not be as big as previously expected.
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But economist Chris Richardson does not expect the prospect for future surpluses will be as rosy as portrayed in the government's 2019/20 budget handed down in April.
"The weird thing over the last 18 months is that even though the economy got worse, the budget got better. Usually they march together," Mr Richardson, a partner at Deloitte Access Economics, told AAP.
"But we think that cycle is starting to turn."
Deloitte Access Economics expects the federal government's budget update on December 16 will point to a surplus of $5.3 billion for the 2019/20 financial year, which would be smaller than the $7.1 billion forecast in April.
Similarly, the budget surplus projection for 2020/21 is also expected to narrow to $8.4 billion, from $11 billion.
Mr Richardson said while overall strong commodity prices have benefited Australia, coal prices are now off the boil.
"Mining profits are turning from a source of good news into a source of bad news for the budget," Mr Richardson said.
Banking profits - and therefore taxes - are also shifting because in a low cash rate environment it is harder for the banks to make a margin.
At the same time, weak wages growth is also undermining the income tax take and GST revenues.
However, the economic climate is also providing opportunities for the government to make savings.
Low interest rates mean government debt repayments ARE cheaper, while low inflation is keeping a lid on spending costs.
And despite a sluggish economy, jobs growth has generally held up, which is keeping welfare payments down.
But Mr Richardson has dismissed Mr Frydenberg's statement the weakness in the economy was due to overseas actors.
"Australia's economy actually slowed because of local factors, notably falls in house prices that spooked consumers and led to drops in apartment construction, as well as a very deep drought," he says.
Deloitte Access has forecast economic growth of 2.2 per cent for 2019/20 compared with Treasury's forecast of 2.75 per cent.
Labor noted Deloitte's growth forecast was below-average and followed similar growth downgrades by the Reserve Bank of Australia, the International Monetary fund and the Organisation for Economic Cooperation and Development.
"The Liberals' lack of an economic plan is leaving the Australian economy dangerously and unnecessarily exposed to turbulence in the global economy," shadow treasurer Jim Chalmers and finance spokeswoman Katy Gallagher said in a joint statement.
The next national growth numbers, for the September quarter, will be released by the Australian Bureau of Statistics on Wednesday.
The report is expected to show an annual growth pace just above the decade low of 1.4 per cent recorded in the June quarter.
DELOITTE ACCESS ECONOMICS BUDGET SURPLUS FORECASTS:
2019/20 - $5.3 billion vs April budget forecast of $7.1 billion.
2020/21 - $8.4 billion vs $11 billion.
2021/22 - $14.5 billion vs $17.8 billion.
2022/23 - $8.7 billion vs $9.2 billion.
Australian Associated Press
