Akin to reductions on a home loan mortgage, the lower interest rates have reduced the government's interest bill to $14.5 billion in 2022-23 from $18.95 billion last financial year.

Budget papers show the average cost of borrowing is now 1.1 per cent, well below the 1.9 per cent that was forecast in the May budget.

"Global interest rates have come down, more than 50 central banks have reduced interest rates and the Australian Reserve Bank is no different," Mr Frydenberg said.

RBA governor Philip Lowe has been telling the federal government (and the states) to use the cheaper borrowing rates to spend on productivity improvements such as infrastructure spending.

Dr Lowe said as early as June, after the central bank's first 0.25 percentage point interest rate cut, that with the 10-year bond rate so low governments should be using the cheap funding for infrastructure projects.

"There must be projects out there with a risk-adjusted return of more than 2 per cent," Dr Lowe said.

However, he was particularly careful not to say whether the federal government should break its commitment to a surplus.


Dr Lowe said his view on governments using more cheaper debt was "not a comment" on the budget surplus.

Shadow Treasurer Jim Chalmers said the government had "raised the white flag" on eliminating net debt.

"The Budget update confirms that net debt has more than doubled under the Liberals to $392 billion, with gross debt crashing through a record $556 billion. The Liberals have abandoned their promise to pay off their own record debt by 2029-30."

Treasurer Josh Frydenberg said that while monetary policy was a matter for the RBA, he said lower rates had helped property prices.

"I do note that the lower interest rates are probably a factor that's contributed to recent increases in the house prices.

"What we have seen is a stabilisation in the housing market, post election, a bit of the uncertainty that hung over that sector as a result of Labor's policies, we're seeing clearance rates up and prices are up and that's good for the economy because it plays into households' confidence, which is a factor in household consumption, which is 60 per cent of GDP," the Treasurer said on Monday.