THE Federal Government is likely to produce a Budget deficit of about $20 billion this financial year on the back of declining company tax revenues, according to new analysis.

The projection by the chief economist of the Australian arm of British bank Barclays, Kieran Davies, is double most expectations, but would be better than the $43.7 billion deficit in 2011/12.



"The Government has been successful in containing spending, although the problem is that revenue has also been weak," Mr Davies said in his analysis released today.



While personal income tax and other forms of revenue had grown solidly - by eight and 14 per cent respectively - during 2012/13, company tax had declined by 22 per cent.



This was due to lower mining sector revenues, following a sharp decline in commodity export prices and subdued growth in finance sector income.



Mr Davies said the Government's dumped $1.1 billion budget surplus forecast for 2012/13 had always been too ambitious.



If it happened, it would be the largest turnaround in the budget bottom line in a single year since what he described as the "horror" Budget of 1951/52.



In that year, spending cuts and tax increases were used to combat an inflation surge caused by a massive commodities boom.



"The forecast return to surplus this year always seemed to us driven by political rather than economic considerations," Mr Davies said.



Two major and costly Government policies, the Gonski education reforms and the National Disability Insurance Scheme, are expected to be incorporated into the May 14 Budget.



Prime Minister Julia Gillard declined to comment on the Barclays forecast.



"You'll see the updated budget in two months time," she said.



Treasurer Wayne Swan last year abandoned his long-held aim of bringing the budget back to surplus in 2012/13, in the face of declining revenues.



Mr Swan told parliament yesterday a dramatic decline in the terms of trade and a stubbornly high Australian dollar had cut revenue by $6 billion since the mid-year budget review released in October.