It's been about a decade since Australia's budget was in surplus, but Deloitte Access Economics is forecasting we will get there next financial year.

That could mean both political parties spend more money to woo voters ahead of next year's federal election.

In its latest Budget Monitor, Deloitte forecasts an underlying cash deficit of $4.9 billion in 2018-19 — the smallest since the global financial crisis — followed by a small surplus of $4.2 billion in 2019-20.



"After a decade of deficits, we're finally back within a whisker of a surplus," director Chris Richardson said.

However, the shift back into the black remains elusive, he said.

"It has taken the current virtuous cycle of surging revenues and some modest spending restraint to get us this close," Mr Richardson said.

"But we really are close."

Higher tax take as revenues surge

Deloitte's report said the economy would be about $27 billion bigger this year than official Treasury projections had it.

And 2018-19 revenues are forecast to be $9.2 billion above where Treasury estimated them.



"Revenues are turbocharged," Mr Richardson said.

Nominal GDP is growing at 5 per cent, but revenue growth is at 10 per cent, he said, "pumped up by surge in profits".

Company tax will raise almost $100 billion this year, which is $8.4 billion above the Treasury budget forecast.

The superannuation tax take is up by $1 billion on Treasury forecasts — with both the company and super tax takes benefiting from firms and funds having run out of tax losses to offset against current tax payments.

Total spending is $360 million less than expected at budget time in May this year, and $140 million more next year.

But new policy promises were being paid for via economic gains.

"It is the economy that's gotten us back to surplus rather than difficult decisions or carefully crafted compromises out of Canberra," Mr Richardson said.



China slowdown possible

The picture is fragile, with a slowdown in China or excessive spending compromising the ability to get back to surplus.

"You don't need much to go wrong to see us head back to deficits," Mr Richardson said.



"The key element is China. If China has its wicked way with commodity prices, big amounts get wiped off the tax take."

And history shows politicians cannot help but spend big before an election, especially in marginal electorates.

Mr Richardson's prediction is that politicians won't be able to restrain themselves.

"Both sides will wave around the mid-year economic outlook that will say it [the economy] is better, and that will give wriggle rom to make promises that are not as affordable as Treasury is saying."



Without any further policy changes, such as extra personal tax cuts announced ahead of the election, Deloitte forecasts cash underlying surpluses of $14.1 billion in 2020-21 and $16.1 billion in 2021-22.

That is $3.1 billion better in 2020-21 and $0.5 billion worse in 2021-22 than Treasury had projected on Budget night back in May.

Bracket creep pain

Despite legislated tax cuts, the problem of bracket creep — where inflation pushes people into higher tax brackets — remains alive and well.

Bracket creep lifts to $4.6 billion in 2019-20, $7.8 billion in 2020-21, and then reaches $11.2 billion by 2021-22, the report said.

"So, even though weak wage growth means bracket creep is only creeping along, it is still enough to mean the taxman will grab a bigger slice of pay packets," Mr Richardson said.

Mr Richardson said almost half of the entire increase in national income this financial year and last is going into Canberra's pockets.



"Almost every second dollar has gone to the taxman rather than staying in the hands of families and businesses," he said.



All that could mean politicians announce more tax cuts ahead of the coming federal election, he said.