Josh Frydenberg's fourth budget boasts the largest and fastest improvement to the bottom line in more than 70 years, with $100 billion worth of reductions in deficits projected until 2025/26.
A stronger than expected economy, record numbers of people employed and a spike in commodity prices has also allowed the treasurer to shell out billions of dollars in spending, including on the much spruiked household support package.
"A strong economy means a stronger budget," Mr Frydenberg told parliament just days out from an election being called for May.
"This is what we deliver tonight. Banking the dividend of a stronger economy."
For the current 2021/22 financial year the deficit is now forecast at $79.8 billion, compared with $99.2 billion predicted in the mid-year budget review released last December.
For 2022/23 the deficit is now put at $78 billion compared to a previous forecast of $98.9 billion.
Treasury has also ramped up its forecasts for economic growth, inflation and wages growth, while the unemployment rate is now seen dropping below four per cent for the first time in nearly 50 years.
Economic growth is expected to be 4.25 per cent this financial year compared to a previous forecast of 3.75 per cent, while Treasury is sticking with its 3.5 per cent rate for 2022/23 - still comfortably above the long-term trend.
The unemployment rate is expected to fall to 3.75 per cent in 2022/23 compared to its current rate of four per cent - a 14-year low.
A tight labour market is expected to see wages growth accelerate from its current rate of 2.3 per cent to 3.25 per cent in 2022/23 and 2023/24, before edging even higher to 3.5 per cent beyond that.
However, inflation forecasts have been increased, starting with a spike to 4.25 per cent this financial year and staying at the top end of the Reserve Bank of Australia's two to three per cent target over the next few years.
The annual rate of inflation was already running at 3.5 per cent in December.
However, in a note to clients released just before the budget release, National Australia Bank was forecasting even higher inflation outcomes in the near term, with an annual rate of 4.7 per cent pencilled in for the March quarter and 5.1 per cent three months later.
Underlying inflation is also expected to hit four per cent by June.
"NAB's view is the RBA will start to hike by August 2022 with every meeting live from May," economist Taylor Nugent said.
Despite already heated inflation, the treasurer went ahead with his much-promised cost-of-living package, responding to petrol prices striking record highs above $2 a litre in recent weeks.
The measures include halving fuel excise for six months, saving 22 cents a litre.
"A family with two cars who fill up once a week could save around $30 a week or around $700 over the next six months," Mr Frydenberg said.
There is also a one-off $420 cost of living tax offset for more than 10 million low-and-middle income earners.
This will come on top of the low and middle income tax offset with individuals now receiving up to $1500 when they make they 2021/22 tax return.
Additionally, there is also a new one-off $250 cost of living payment for six million pensioners, carers, veterans, job seekers, eligible self-funded retirees and concession card holders.
Still, despite promises of support measures, consumer confidence has fallen for three straight weeks and inflation expectations have spiked to 6.4 per cent, the highest since June 2012, according to the weekly ANZ-Roy Morgan survey.
