A slump in forecasted revenue has savaged the Federal Government's surplus plans and wiped away almost half the surpluses originally tipped for the next four years.

Key points: The Government now expects a $23.5 billion surplus spread over the next four years, down from $45 billion

The Government now expects a $23.5 billion surplus spread over the next four years, down from $45 billion This financial year is still expected to be the first surplus in more than a decade, but it has been revised down about $2 billion

This financial year is still expected to be the first surplus in more than a decade, but it has been revised down about $2 billion The Government blames a weak global economy as well as domestic issues like bushfires and drought

The mid-year budget forecasts a surplus of $5 billion this financial year, down from the $7.1 billion estimated ahead of the federal election.

The Government still expects to deliver a surplus each year for the next four years, but the latest forecast banks $23.5 billion, down from the $45 billion trumpeted in the budget.

The Mid-Year Economic and Fiscal Outlook (MYEFO) shows the Government expects revenue will be down $3 billion on earlier projections. Treasury officials have also slashed forecasted revenue by more than $32 billion.

The Government blames the hit on its budget on "weak momentum in the global economy" and "the devastating effects of drought and bushfires".

"Our devastating drought has already taken a quarter of a percentage point off GDP growth and reduced farm output by a significant amount over the last two years," Treasurer Josh Frydenberg said.

"Global trade tensions have weighed heavily on consumer and business sentiment, with forecasts for global economic growth and that of our major trading partners downgraded in today's MYEFO."

Income from the GST, which offers a snapshot of consumer spending, is tipped to be down more than $10 billion on what the Government had expected when it released its budget in April.

"[GST revenue is] lower than the states would have hoped, indeed the Government would have hoped, but, in fact, they're pretty consistent with where the states have been forecasting it," Mr Frydenberg said.

Shadow Treasurer Jim Chalmers said it was time the Coalition took responsibility for the economy instead of blaming Labor, which had not been in power since 2013.

"Growth downgraded, unemployment higher, wages growth weaker, business investment dismal, government's economic credibility destroyed — that's the mid-year budget update in a nutshell," he said.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 1 minute 34 seconds 1 m 34 s Labor slams Coalition's economic credentials

Unemployment rate up on forecasts

The negative assessment extends to workers, with unemployment now expected to be 5.25 per cent this year, up from a forecast of 5 per cent.

The Government expects unemployment to return to 5 per cent next year and remain steady in coming years.

That forecast sits at odds with what the Reserve Bank of Australia (RBA) wants.

It has pegged an unemployment rate of 4.5 per cent as the level required to drive wage growth and inflation.

"If we went harder, for example, on infrastructure, you would see unemployment lower, and wage growth faster than otherwise," said Chris Richardson, a partner at Deloitte Access Economics.

"But it would mean we would be cashing in a degree of the recession insurance that both, from the Reserve Bank and Treasury, they like to hang onto that in case the world throws something nasty our way."

Josh Frydenberg and Mathias Cormann have downplayed the impact of a smaller-than-expected budget surplus. ( ABC News: Ian Cutmore )

Wage growth for workers revised down

Wage growth has also been revised down from 2.75 per cent to 2.5 per cent.

"If people don't feel as though they have got confidence that they're going to be able to pay their bills into the future, because their wages aren't going up, they're not going to spend," Australian Council of Trade Unions secretary Sally McManus said.

"That flows through the whole economy, everything from GST, revenues, retail sales, all of those things are affected if working people don't have confidence in their spending power."

The MYEFO shows the Government expects wage growth to be below earlier forecasts annually for the next four years.

"There are some clear challenges for the Australian economy, including the narrow base for economic growth," said Jo Masters, the chief economist at EY.

"The weakness in private domestic demand is impacting government revenue from a broad range of sources and continues to face a variety of headwinds with both consumers and businesses cautious, which is impacting their spending patterns and intentions."

The outlook includes an additional $4.2 billion in infrastructure over the forward estimates, with Queensland set to be the biggest winner, receiving more than a quarter of the money.

Australia's debt sits at $392 billion

Net debt is projected to be $392.3 billion in 2019-20, representing 19.5 per cent of GDP.

In April, the Government pledged to wipe out net debt within a decade. That's no longer the case, with MYEFO tipping net debt to be around 2 per cent of GDP by the end of the next decade.

The Government blames Labor from its time in power for the nation's debt - an allegation the Shadow Treasurer fiercely rejected.

"Mathias Cormann has been in the same job now, he is in his seventh year as Finance Minister, in the third term of a Government," Mr Chalmers said.

"You would think by now this guy would finally take some responsibility for the fact that net debt has more than doubled on his watch."

"The economy is floundering on his watch, growth is slower since he became the Finance Minister when government changed hands."

Real GDP is also tipped to fall 0.5 per cent to 2.25 per cent.

But the Government expects to meet its forecasted real GDP estimates in the coming years.

If the Government delivers a surplus this year, it would be the first time in 12 years for a federal budget.

"The surplus has never been an end in itself, but a means to an end — an end which is to reduce interest payments to free up money to be spent elsewhere across the economy," the Treasurer said.