The federal budget is on track to reach the end of next decade with the largest surplus since the days of John Howard but it will be built on a soaring tax take from low and middle-income earners.

The Parliamentary Budget Office (PBO), in its annual review of the budget and its long-term projections, said a combination of strong revenue and tight control on spending meant the budget was heading for a $53.7 billion surplus in 2029-30. At 1.6 per cent of gross domestic product (GDP), it would be the largest surplus since 2007-08.

Federal Treasurer Josh Frydenberg delivers the 2019-20 budget. The Parliamentary Budget Office says longer term, the budget is on track for a $54 billion surplus. Credit:AAP

The PBO noted surpluses were likely to drop in some years as the government put in place its planned tax cuts but the overall trend was positive because of solid revenue flows.

It said by 2029-30, the government would collect $393 billion in personal income taxes, or 12 per cent of GDP. Last financial year it collected $223 billion, or 11.5 per cent of GDP.