A plan to build 1 million new homes by the end of the decade as part of a historic deal between the federal government, states, private investors and the construction sector, will be revealed in tonight's federal budget as Labor seeks to mitigate the nation's housing crisis.

In his first budget, Treasurer Jim Chalmers will outline the government's plan to increase housing supply over five years from 2024, although it will rely heavily on the market itself.

Under the scheme, the Commonwealth would support an additional 10,000 affordable dwellings in that time frame, costing the budget $350 million, with the states and territories expected to deliver the same number of homes for low to moderate income households.

Overall, it has nominated a target of 1 million new homes by 2029, but that is largely consistent with what has been delivered historically — in the five years prior to the pandemic, just over 985,000 homes were created.

Flagging the announcement this morning, the treasurer told the ABC's AM program he had been working closely with stakeholders on the plan.

"We believe we need an ambitious target for affordable homes," he said.

"And so that's a big focus of ours, we've made no secret of that."

Speaking ahead of the budget release, Greens leader Adam Bandt said he believed the government needed to adopt much more ambitious policies to ensure Australians could buy or even rent their own homes.

"Unless there's a very concerted effort to make sure housing is affordable, it will still be out of reach for people," he told the ABC's Afternoon Briefing.

"At the moment, people are living in their cars, and in a wealthy country like Australia that should not be the case, and that's happening because they can't afford to rent."

Budget to show improvement to bottom line 

Tonight's budget is also expected to 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 tonight Mr Chalmers will reveal it is expected to be less than half that, at $36.9 billion, largely because more people are in work and commodity prices are higher than expected.

Much of that revenue will be banked, with the government repeatedly seeking to lower voters' expectations about cost of living relief in the budget in recent weeks.

Speaking this afternoon, Prime Minister Anthony Albanese reiterated that message, telling parliament the budget struck the right economic balance.

"What you will see from tonight's budget is a responsible budget that takes pressure off the cost of living, that is family friendly without putting pressure on inflation," he said.

Assistant Treasurer Stephen Jones used Question Time to argue Labor inherited a "fiscal mess" from its predecessors that the government would move to address.

"We will also do the hard work that this mob over here couldn't do," he told parliament.

"And that is ensure we start to pay down the debt and deal with the structural deficit that this mob over here — squawking like political bin chickens — this mob over here left us to fix up."

The budget will also forecast slowing growth, rising unemployment and stubbornly high inflation with economist Chris Richardson telling the ABC that was bad news for households.

"It's pretty sobering," he said.

"The chance of you losing your job has gone up, if you earn a wage — even more of that is going to be stolen away in terms of purchasing power by what's happening to inflation, and if you've got a mortgage, it's clear on the Treasury view that interest rates are going higher and they'll stay there for longer."

Earlier today, Shadow Treasurer Angus Taylor called on the government to use the budget to clearly state how it will deal with those issues.

"We want to see a successful budget, but ultimately the test for Labor is whether they have that clear and comprehensive plan to deal with those pressures Australians are facing," he said.

This budget is the government's first since wresting power from the Coalition in May.

It is likely to use it to outline how it will fund its election promises, before beginning the more difficult process of addressing long-term structural problems down the track.

The treasurer has identified the NDIS, aged care, health, defence and interest payments on debt as the five key pressure points in the budget.

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