Although Treasurer Jim Chalmers has confirmed Tuesday's fiscal blueprint will not show a return to surplus in any year in the four-year budget outlook, the forecast deficit will narrow in every year compared to December's mid-year update.
The mid-year economic and fiscal outlook projected a cumulative deficit of about $143 billion from 2025/26 to 2028/29.
Prime Minister Anthony Albanese confirmed tax changes will be delivered, in addition to measures to help drive housing supply.
"Tonight will be about giving young people a more level playing field," he told Nova Adelaide radio on Tuesday morning.
"This is a big reform budget, building resilience in our economy, but also really tackling some issues that have been kicked down the road, essentially for too long."
Economists had predicted a substantial improvement to the budget bottom line as a result of higher tax revenue, in part because of the Iran war.
Dr Chalmers said there will be an emphasis on the cost of living, housing and rising inflation spurred by the conflict in the Middle East.
"We choose the hard road of reform, not the path of least resistance, a responsible budget, a reform budget," he told reporters in Canberra.
"The status quo in the housing market and in the tax system is not working for too many Australians."
Labor has been keen to portray this budget as one of spending restraint, after warnings by economists and Reserve Bank governor Michele Bullock that splashing out would only fuel inflation and risk further rate hikes.
Some big-ticket spending measures have been announced, including on defence, hospital funding and rail infrastructure, but these will also be partly offset by tax increases on property investors and people with trusts.
Media reports suggest a one-off tax handout to wage and salary earners of $200 to $300 will only kick in in 2027, so as not to stoke inflation in the near term.
Finance Minister Katy Gallagher has found $63.8 billion in gross savings in the budget, but it remains to be seen how much of that will be banked to narrow the deficit and how much will be merely shifted to other spending areas.
"We are thinking about relief as part of this budget, in addition to resilience and reform, which will also be key parts of the budget," she told ABC News Breakfast.
The centrepiece of the savings package will be a forecast $35 billion reduction in the cost of the runaway National Disability Insurance Scheme.
Growth in government payments when adjusted for inflation is forecast to average 1.5 per cent for the eight years to 2029/30, which is the lowest rolling eight-year average in almost three and a half decades.
The budget will show the sum of the policy decisions taken by the government improved the budget for the second time since Labor took power in 2022, after a $2.2 billion improvement in December.
However, that was only due to some creative accounting around the government's home battery scheme.
The forecast cost of the scheme ballooned from $2.3 billion to $11.6 billion, which was counted as a parameter variation, but changes to the scheme to rein in its largesse were counted as government policy, making a $4.9 billion blowout look like a $6.7 billion saving.
Nationals leader Matt Canavan said if Mr Albanese has changed his mind on negative gearing and capital gains tax, he should take that proposal to Australians at a new election.
"Clearly, this prime minister does not have the ticker nor the integrity to ... face the Australian people when he changes his promise," he told Sky News.
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