Tax collections are at risk from chronically weak wages growth and stubbornly low inflation, the Treasury warns in its pre-election update.
The economic and fiscal forecasts in the Pre-election Economic and Fiscal Outlook (PEFO) on Friday were unchanged from the budget on May 3.
But Treasury said the both inflation and wages - already subdued - could turn out to be even weaker the forecast.
And that could spell trouble for the government's plan to bring the budget gradually back into surplus.
"The risks to inflation and wages remain on the downside and, if inflation and wages remain persistently weak, they would detract from nominal GDP (gross domestic product) growth with negative consequences for tax receipts," Treasury said in the PEFO.
A reduction in inflation-indexed government payments would reduce some of the impact, Treasury said.
If inflation outcomes were in line with the low end of the range in Reserve Bank's latest Statement on Monetary Policy, published three days after the budget, the value of GDP could be around 1.25 per cent lower than forecast by 2017/18.
The PEFO also repeated the warning on commodity prices from the budget, saying that a ten per cent fall in non-rural commodity prices could cut the value of GDP by one per cent below forecast by 2017-18.
"This, in turn, would be expected to affect tax receipts and payments, worsening the underlying cash balance by around $2.2 billion in 2016/17 and $5.4 billion in 2017/18."
The PEFO's forecasts for the deficit were virtually identical to the budget's, with the deficit tipped to fall from $39.9 billion in 2015/16, to $37.1 billion in 2016/17 and $26.1 billion in 2017/18.
