More cuts, new spending and a deeper deficit will be spelt out in the federal government's budget update next week.
Treasurer Joe Hockey will release the mid-year economic and fiscal outlook on Monday, which economists say could reveal a deficit for 2014/15 upwards of $35 billion.
Mr Hockey says the government faces the twin "headwinds" of iron ore prices falling to about $60 a tonne and a Senate blocking billions of dollars in budget savings.
This meant the deficit would be higher than in the May budget, when the forecast was for a $29.8 billion shortfall, but the size of the rise would be "better than expected", he said.
"New spending we are offsetting with new savings and the savings we are announcing (on Monday) won't have an impact on the Australian economy," Mr Hockey told Sky News on Friday.
The comments have been interpreted as pointing to further cuts in foreign aid spending, but no new tax measures.
The treasurer said the projected surplus for 2018/19 would not be achieved because "we want to keep the economy going".
Mr Hockey said the government had been creating jobs at three times the speed of last year, without which the unemployment figure would have a seven in front of it.
Despite low business and consumer confidence, the treasurer said the economy would get a boost from new infrastructure projects, high demand for exports and strong housing construction.
"There's no doubt the Australia economy has a good trajectory (but) we've got to do more," he said.
The MYEFO papers would include budget measures that have yet to pass parliament.
Mr Hockey said that next year the government would hold a "conversation" with the Australian public on tax reform, federal-state relations and other issues to meet the challenges of coming decades.
Shadow treasurer Chris Bowen said the MYEFO would be a document "full of excuses, full of blame-shifting and full of pathetic reasons why he (Hockey) has lost control of the budget".
"He told us that it would be a government of no excuses and no surprises, and of course we have the opposite," he said.
Mr Bowen said MYEFO should not reflect measures that had no chance of passing parliament and its figures should be independently tested by the Parliamentary Budget Office.
The government has foregone about $8 billion over five years in spending cuts as a result of negotiations to get budget measures through the Senate.
Tighter checks on disability pensions and other welfare payments are also expected in the mid-year review.
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