Surging inflation and sky-high commodity prices are largely to thank for a $40 billion improvement to the bottom line of the federal budget.
Treasurer Jim Chalmers will hand down his first budget at 7:30pm AEDT following Labor's election win earlier this year.
He says it will show a multi-billion-dollar improvement on forecasts from the previous government's budget in March.
The deficit had been forecast to be $78 billion for this financial year.
But on Tuesday Mr Chalmers will reveal it is expected to be less than half that at $36.9 billion.
It's an improvement that is primarily due to higher commodity prices and greater income tax revenue, which will be banked rather than spent.
"In times of extreme global volatility and uncertainty, our best defence is a responsible budget, and that's what you'll see tonight," Mr Chalmers said in a statement.
"Our responsible approach to revenue upgrades means the budget bottom line will be more than $40 billion better over the forward estimates in aggregate, and debt will be lower than previously forecast.
"That's less debt than the Liberals but there'll be more to show for it.
"The primary influence on this budget is inflation. We are putting a premium on restraint and resilience because that's what the times call for."
"We've been left with a trillion dollars of debt and a budget deep in structural deficit, but hard decisions mean we can still deliver our commitments, keep spending under control, and start down the long road of budget repair."
High inflation can boost tax revenues and improve debt ratios, and overall inflation is forecast to hit 7.5 per cent by the end of the year.
Tuesday's budget will forecast inflation to stay higher for longer, but also add about $100 billion in forecast revenue over four years.
On Monday the government said an audit of spending by the Morrison government had come up with $10 billion in budget savings over the forward estimates.
Funding for a commuter car park in Sydney, money for Melbourne road and rail projects and a regional funding round will be scrapped in Tuesday's federal budget, saving hundreds of millions.
It comes as Mr Chalmers has used high national debt to build a case for restrained spending.
The Treasurer has identified the NDIS, aged care, health, defence and interest payments on debt as the five key pressure points in the budget.
