In its Mid-Year Economic and Fiscal Outlook (MYEFO), released on Tuesday, the government has projected a surplus of $1.5 billion for the year, which was less than its May forecast for a surplus of $3.5 billion.
It says the surplus will be achieved by new savings worth $11.5 billion over four years to 2014/15.
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Read the report at budget.gov.au
The government also said the expected deficit for this 2011/12 financial year will be larger at $37.1 billion. It had previously expected a deficit of $22.6 billion.
The government has also cut its growth forecast for this financial year and next, and in line with revisions made by the Reserve Bank of Australia earlier this month.
Economic growth for 2011/12 and 2012/13 is now forecast at 3.25 per cent each year, down from previous forecasts of four per cent and 3.75 per cent respectively.
In explaining the changes, the government cited a number of factors.
'The deterioration in global conditions has contributed to a weaker near"‘term outlook for the Australian economy than at Budget, with forecast gross domestic product (GDP) and employment growth both revised lower', the report reads.
Instability in the global economy had wiped $20 billion off tax revenues over the forward estimates.
'Conditions are also expected to remain uneven, with the weaker global economy, the high Australian dollar and cautious household spending behaviour creating significant challenges for some sectors.'
The government says the sovereign debt crisis means action is crucial.
'This is why the Government is taking steps to build savings steadily over the forward estimates, to ensure Australia's public finances and economy remain strong and to underpin confidence at a time of heightened global instability.'
