Budget forecast may offer pre-election 'reality check'

Politicians have been warned against "election sweeteners" as economists flag growing fiscal holes in Australia's budget.

Treasurer Jim Chalmers has started feeding commitments to the public ahead of the March 25 budget and is expected to announce disaster recovery funds for Queensland and northern NSW communities battered by ex-tropical cyclone Alfred.

More promises are expected in the coming days, but politicians have been urged to be prudent as the Deloitte Access Economics' Budget Monitor, released on Monday, has forecast a $26.1 billion underlying cash deficit and revenue downgrades of $11.3 billion over four years.

The projection is slightly smaller than the $26.9 billion deficit predicted in the December mid-year economic and fiscal outlook, but report co-author Stephen Smith remained concerned about the deterioration of the budget bottom line.

"(This should be) a reality check for politicians wanting to announce election sweeteners in the weeks ahead," he said.

"The long-term budget projections show deficits as far as the eye can see and ineffective spending is the last thing Australia needs."

Treasury's commodity price assumptions look less conservative than in previous years, when stronger-than-expected sales of minerals such as iron ore and gold resulted in the bottom line coming in solidly better than forecast at each budget update.

But surprisingly negative economic outcomes mean revenues are "simply not going to measure up", with slower growth and softer company profits expected to downgrade revenue in later years.

At the same time, spending pressures are escalating in areas like health, aged care, defence and the National Disability Insurance Scheme.

As a result, the report estimates the underlying cash balance will be cumulatively $13.1 billion worse off over the four years to 2027/28 compared to the mid-year outlook, pushing net debt to 23.9 per cent as a share of GDP, up from 19.6 per cent this financial year.

Compounding this is the growing trend for governments to squirrel away spending "off budget", like Labor's changes to student debt repayments, blowing out the headline deficit and hampering public spending capacity long-term.

"Unfortunately, the election is more likely to put an outsized focus on flashy proposals designed to woo voters who are focused on their day-to-day," report co-author Cathryn Lee said.

"This will distract from a pressing policy issue facing the nation: the fiscal holes in Australia's medium-term budget outlook are getting bigger, not smaller."

During his budget preview speech at the Queensland Media Club on Tuesday, Dr Chalmers will announce extra money to fund recovery in the aftermath of ex-tropical cyclone Alfred.

"We are still getting a handle on the economic fallout, but it will be substantial," he will say.

The disaster's financial impacts are still being calculated, but it has already dealt a billion-dollar hit to GDP, could wipe one quarter of a percentage point from quarterly growth, caused the economy to shed 12 million work hours, and could put upwards pressure on inflation.

It is unclear exactly how much will be earmarked in the budget but it is expected to cost at least $1.2 billion, on top of $11.6 billion blocked out for disaster support at the mid-year economic and fiscal outlook.

Since MYEFO in December, the government has already announced more than $18 billion in new spending, including its $8.5 billion boost to Medicare, student debt relief, $7.2 billion for the Bruce Highway, and more.