Tax revenue is expected to be $25 billion higher over the next four years, as the Albanese government tempers expectations ahead of this month’s federal budget.

The budget, to be handed down next week by Treasurer Jim Chalmers, will show a surge in tax receipt upgrades from the forecast in the mid-year economic and fiscal outlook.

A surplus still remains within reach for 2023/24, as the government receives $100 billion less than the $129 billion average upgrade in the last three budgets.

Labor is slated to bank about 95 per cent of the additional revenue in a bid to take pressure off persistent inflation.

Chalmers said the government was realistic about the challenges facing the nation’s economy.

“This includes not expecting the same sorts of massive revenue upgrades that we’ve seen in recent budget updates to continue,” he said.

“We’ve made substantial progress in getting the budget in better nick, having delivered the first surplus in 15 years with a second one in prospect, but we know that the pressures on the budget are intensifying, not easing.”

Economists have been warning the government to keep its spending in check to avoid fuelling inflation.

Finance Minister Katy Gallagher said the government will deliver $1 billion in savings on consultants and contractors, but finding them was becoming more difficult.

She said there would be unavoidable spending for programs that were coming to an end, including in health.

“You’ll see a big focus in this budget is cost of living, obviously dealing with inflation, and then putting down the foundations for growth,” Gallagher told ABC’s Insiders on Sunday.

– AAP