Reserve Bank governor Glenn Stevens has warned against "very aggressive" discretionary spending cuts to achieve a short-term federal budget surplus.
But he says there needs to be a serious conversation about whether the Commonwealth can afford community expectations for new services.
The warning comes as Treasurer Joe Hockey prepares to hand down the mid-year economic and fiscal outlook on Tuesday.
The outlook is expected to show the 2013/14 budget deficit heading towards $40 billion with little likelihood of a return to surplus over the forward estimates.
Government debt is on track to breach the $400 billion mark.
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Mr Hockey is expected to announce a range of spending cuts that will reduce the deficit over the next four years.
Mr Stevens said there was no need for "very aggressive discretionary short-term budget cuts" to deliver a short-term surplus.
However, there should be more discussion about whether the Commonwealth could afford community expectations for new services.
"I'm not sure that we ought to wait five years to have that conversation," he told the Australian Financial Review on Friday.
That "real conversation" ought to be about the five-to-eight year horizon and whether community aspirations for government spending are matched by revenue sources.
"We should start that conversation now, because it's going to be a long conversation," Mr Stevens said.
