Treasurer Josh Frydenberg remains cautiously on track to delivering a prized surplus in next year's federal budget and the best set of books since the Howard government a decade ago.

Key points: $11.4 billion deficit forecast for 2018-19 expected to be more than halved

$11.4 billion deficit forecast for 2018-19 expected to be more than halved Budget deficit projected to be at its lowest since 2007-08

Budget deficit projected to be at its lowest since 2007-08 Slow wage growth and falling real estate values present challenges for the Government

The mid-year economic and fiscal outlook (MYEFO) released this morning shows the budget deficit is at its lowest level since 2007-2008.

It is understood the $14.4 billion deficit for 2018-19 forecast in the May budget will be more than halved after higher-than-expected tax receipts and lower payments by the Government.

With a federal election likely to be called early in the new year, economic management and fiscal strategies to return the budget to surplus are key for both the Coalition and Labor.

A lift in employment by 308,100 over the year to October 2018 and the lowest proportion of working-age people on welfare in 25 years is also adding to optimism that a surplus will be revealed in the April budget.

The holy grail of a budget surplus in 2019-20 is also underpinned by business conditions above their long-run average and consumer confidence having its best run since 2011.

In a statement issued on Sunday night, Treasurer Josh Frydenberg said the first surplus in a decade would be delivered without increasing taxes while providing services and infrastructure critical to the economy.

"Our economic fundamentals are strong with the unemployment rate down to 5 per cent, economic growth faster than all G7 nations except the United States and our AAA credit rating reaffirmed," Mr Frydenberg said.

"A strong economy and the health of the nation's finances are a result of the Government's economic plan, which has been endorsed by the IMF and OECD."

Mr Frydenberg says the Government's economic plan is improving the nation's budget without raising taxes. ( AAP: Mick Tsikas )

Signalling a platform for a tightly-fought election, Mr Frydenberg said a strong economy would allow the Coalition to deliver services such as healthcare, disability support, aged care and schools.

"The Government's plan for a stronger economy is working, but there is no room for complacency. The job of cleaning up Labor's budget mess is not done and we must stick to the plan," Mr Frydenberg said.

The Charter of Budget Honesty requires MYEFO to be released six months after the last budget to update the economic and fiscal outlook outlined from the previous budget.

Despite the optimism, the Government faces a number of key challenges: slow wages growth, concerns about falling real estate values, tighter lending standards as a result of the financial services royal commission and fallout from a potential trade war between the US and China.

The traditional May budget has been brought forward to April 2, adding to speculation that the Prime Minister will call an election in May to follow the delivery of a budget surplus.