Treasurer Scott Morrison admits Malcolm Turnbull has given him a personal "mission" to find room for personal tax cuts in 2018.
That's despite the budget still not on track for a surplus until mid-2021.
"It is our intention to ensure that we provide tax relief for middle income Australians and we stay on track for our budget surplus," Mr Morrison told reporters on Tuesday.
"Those two things both have to be achieved."
Spruiking his mid-year budget update at the Sydney Markets, Mr Morrison was talking up the improved budget picture of smaller deficits and reduced debt.
Handing down the mid-year review on Monday, he forecast a budget deficit of $23.6 billion for this financial year compared to the previous estimate of $29.4 billion made in May.
Further ahead, he was also sticking with a forecast for a surplus by mid-2021, and larger than previously thought at $10.2 billion.
"Giving tax relief to middle income Australians is the mission the prime minister's given me," he told the Nine Network.
However, National Australia Bank markets chief economist Ivan Colhoun says the forecasts do not appear to allow room for significant income tax cuts.
Wage growth forecasts over the next four years were also trimmed, although Mr Colhorn thought "on current trends still seem somewhat high".
Mr Morrison implored opposition senators to back his government's push to deliver further company tax cuts in the new year.
"The only people standing in the way of, frankly, Australians having a better chance at higher wages is the Labor Party because what we're trying to do here is drive investment," he said.
Labor and the Greens have condemned the $2.2 billion in university funding cuts included in the budget update.
But Mr Morrison defended the decision to bring down the university loan repayment threshold to $45,000, arguing a quarter of the loans are never repaid and a third of degrees are never completed.
He also rejected criticism of the decision to freeze university funding at 2017 levels for two years, accusing universities of building up a treasure chest over recent years.
