Low and middle income Australians are poised to receive one-off payments to compensate for a higher cost of living in a federal budget that will record big improvements to the bottom line.
But the ABC understands a tax offset introduced four years ago may be phased out after the current financial year as a possible trade-off.
Among the options will be a cost of living bonus payment, targeted at those hit hardest by the steepling price of petrol, groceries, health and housing.
In an interview with the ABC, Treasurer Josh Frydenberg said families would be the prime targets for budget relief.
"We fully understand that the number-one topic around kitchen tables of Australia is cost of living. And so there will be some relief in this budget," Mr Frydenberg said.
But he said any help had to be carefully designed to ensure it does not worsen inflation.
"We don't want to overheat the economy," he said, emphasising that any compensation would be temporary.
"From the start of this crisis, our economic support has been temporary, targeted and proportionate to the challenge we face.
"We haven't built in long-term structural spending, we've done what has been needed to be done. And again that's what you'll seeing in the budget in just over a week's time."
It is understood the Low and Middle Income Tax Offset, worth up to $1,080 a year, may not be extended.
It is already legislated for the current financial year, payable later in the year when workers receive their tax refund.
Mr Frydenberg's March 29 budget — his fourth as Treasurer — is expected to reveal a big deficit for 2022-23.
In December, it was estimated it would be just under $99 billion, but the updated figure is expected to have tumbled by tens of billions of dollars.
This is because of a faster-than-expected economic recovery that has spurred company tax receipts and an unemployment rate that is expected to fall below 4 per cent by mid-year.
The lower deficit will also be despite significant outlays in emergency payments caused by the floods that have damaged or devastated parts of Queensland and NSW.
"The good news is that we've been able to keep the unemployment rate low at 4 per cent — that's the lowest in 14 years.
"Female unemployment is at the lowest level since 1974. That's great news. And it does go against Australia's experience in the 1980s and the 1990s recession, when it took up to a full decade to see the unemployment rate recover.
"So it's been a real focus for us to keep people in working to create new jobs. I think that's been a great story. But we've also got to deal with the cost of living pressures — pressures, many of which have been coming from the international situation, like the oil price."
