Australia's budget has finished about $6 billion better off in the 2025/26 financial year, the government has said, as it braces for a damaging interest rate rise.
Treasurer Jim Chalmers and Finance Minister Katy Gallagher described their fiscal credentials when they released the final budget outcome on Monday, but also face questions about a gloomy economic outlook.
Chalmers noted that today's improvements did not come from higher taxes on wages or commodities.
Though he readily welcomed the government's improved bottom line, he said there are "difficult months" to come, acknowledging that interest rates are expected to rise when the Reserve Bank of Australia (RBA) meets on Tuesday.
Gallagher confirmed the improvement to the underlying deficit, which was projected to be $28.3 billion in the May budget.
With deficits projected for another decade, and mortgage holders bracing for another Reserve Bank rate hike on Tuesday, Gallagher was forced to defend the role of government spending on inflation.
With inflation stubbornly above the RBA's 2-3 per cent target band, the Middle East oil shock is set to keep price pressures elevated for longer.
Brent oil futures lifted to US$106 a barrel as peace talks between the US and Iran hit another snag.
The shutdown of Saudi Arabia's East-West pipeline, higher Chinese imports and softer exports from non-OPEC countries have further weakened the supply picture, said the Commonwealth Bank's head of commodities Vivek Dhar.
Median property prices nationwide have slumped 3.6 per cent since March's cyclical peak as the removal of tax concessions in May's budget combines with three consecutive rate hikes to reduce buyer confidence.