The federal budget is sliding deeper into the red, Treasurer Jim Chalmers has confirmed, with next month's mid-year budget update to show a larger deficit than had been expected in May.

A new report by Deloitte Access Economics, an advisory firm, has predicted the December update will show a budget deficit of $33.5 billion for the current financial year, a deterioration of $5.2 billion.

Authors Cathryn Lee and Stephen Smith said a drop in global commodity prices was the main culprit, wiping $18 billion off company tax receipts over the next four years.

The report predicted income tax receipts would be $8.2 billion higher owing to persistent inflation.

But the net result would be a hit to the bottom line, a sharp contrast to the massive upgrades seen since the pandemic, averaging $80 billion an update.

The authors said the change in fortune showed reliance on revenue upgrades was "not a sustainable fiscal strategy".

"The government deserves credit. Most of the unexpected revenue which has flowed into federal coffers over the past two years has been saved rather than spent," Ms Lee said.

"That has required discipline … More generally, however, over the last two decades both major political parties have fallen short of the standard of fiscal rectitude."

Mr Chalmers confirmed the downgrades in a speech in parliament last week.

"We've warned for some time that pressures on the budget are building, not easing, and [Deloitte's report] is consistent with that," he said on Monday.

"There's still a lot of work ahead of us to clean up the mess we inherited."

The government delivered two consecutive budget surpluses in 2022-23 and 2023-24, which Mr Chalmers heralded as "the biggest turnaround in the budget in a parliamentary term in Australian history".

But a deficit on the scale forecast by Deloitte would also make history as the biggest year-to-year turnaround in the balance sheet on record.

Spending to rise but authors welcome new government policies

The report also forecasts an upgrade of $11.2 billion to spending over the next four years, partly because of higher inflation and partly because of newly announced government spending.

That figure does not include the $16 billion cost of the government's proposal to wipe HECS debts, which is not counted using the most popular measure of the budget balance, the underlying cash balance, but still affects the broader balance sheet.

But it does include $1.3 billion in new domestic violence-related funding, $930 million in aged care funding, and $900 million to encourage states to slash red tape.

Ms Lee praised the aged care reforms, which have a short-term cost but will save billions in the long-term, and the productivity fund.

"Both represent good policy, alongside the energy transition reforms that are underway," she said.

But she added deeper reforms had been neglected for decades, creating "a coddled and cosseted economy bereft of competitiveness and dynamism".

"Economic and productivity growth are moribund and real incomes are declining," she said.

The authors voiced concerns about the government's proposal to direct the Future Fund, a $230 billion investment fund set up to meet future budget needs, to invest more in housing and green energy.

"Australia's economic institutions like the Future Fund should not remain static … [But] the changes raise more questions than they answer," Mr Smith said.

"If having regard to these national priorities can be consistent with maximising returns, why has the Future Fund not invested more in these areas in the past?

"Equally … If it changes nothing, then why was it published?"

Trump adds to uncertainty

Mr Smith said the election of Donald Trump in the US could add to the global pressures on the federal budget because any tariffs on China could constrain its demand for iron ore and other exports, and by extension constrain company tax receipts.

"The Chinese economy is already reeling from a dislocation of the property market, high debt levels and worsening structural challenges such as a declining population …" he said.

"Should substantial tariffs be slapped on imports into the United States, including at rates of up to 60 per cent of goods from China, Australia's federal budget will not be immune."