Treasurer Scott Morrison is expected to reveal a sea of red when he hands down the mid-year budget review.
Economists predict the mid-year economic and fiscal outlook on Tuesday will show cuts to economic growth forecasts, bigger budget deficits and little chance of a surplus on the horizon.
"It likely will make for sober reading," JP Morgan chief economist Stephen Walters has told his clients.
Mr Morrison and Finance Minister Mathias Cormann will also unveil budget cuts of at least $5 billion to pay for a suite of measures announced since the May budget.
The extra spend includes the $1.1 billion innovation agenda, reversing Labor's bank deposit tax, more roads spending and the increased humanitarian refugee intake.
"Most portfolios have had to make a contribution to savings, as is appropriate," Communications Minister Mitch Fifield said on Monday.
Shadow assistant treasurer Andrew Leigh is concerned the result will be an attack on the poor.
"We know for the quantum of savings the treasurer is talking about, they can only be found through cuts to the most vulnerable," he said.
Economists expect the 2015/16 deficit could be between $37 billion and $42 billion, blowing out from the $35.1 billion forecast by former treasurer Joe Hockey in the May budget.
That will largely be the result of falling commodity prices, especially iron ore which stands at around $US38 per tonne and $US10 lower than the average predicted in May, hitting tax revenues.
The impact of the drop in prices could have been worse if not for the decline in the Australian dollar, which was trading at just under 71 US cents on Monday compared with an average 77 cents predicted at the time of the budget.
Economists anticipate the deterioration will occur across the four-year budget estimates, which would push out any return to a budget surplus beyond 2019/20 as predicted by Mr Hockey.
Mr Morrison already has indicated he won't be making "hairy-chested" promises about budget surpluses.
Senator Fifield concedes achieving a surplus is a difficult task.
"Unfortunately, it takes much longer to repair a budget than it does to damage a budget," he said.
But Opposition Leader Bill Shorten said nothing the government has done in the past two years is working.
"It seems to me that the Liberals, who pride themselves on talking up their economic management credentials, don't seem to be taking Australia forwards," he told reporters in Sydney.
