The Turnbull Government's "remarkable discipline" in spending has it on track to achieve a budget surplus on schedule, but a leading analyst has warned it could quickly evaporate in tax cuts and Australia's finances remain vulnerable to any economic shock.

Former Treasury official and Industry Super Australia (ISA) chief economist Stephen Anthony has run his ruler over the Commonwealth's finances ahead of the May 8 federal budget.

"We'll probably get close to surplus a little faster than we thought we would in the budget year that is coming up, '18-19," he told the ABC.

But he expects the Government will not see a surplus before the next federal election, due by May 18, 2019.

"The final path to surplus, the final arrival date is likely to be where the Government expected and that is '20-21," he added.

However, the federal budget will not hit what Mr Anthony describes as a "material surplus" — that is a surplus around 1 per cent of GDP (about $17 billion currently) — until the mid-2020s.

"We are saying that the budget will move into a sizeable surplus by the middle of next decade, even allowing for the company tax cut," he forecast.

Mr Anthony said Australia needs a surplus of at least this size to start making a meaningful dent in the Federal Government's net debt of $365 billion that will have built up by then.

He also remains worried about the temptation to fritter modest surpluses away.

"The risk is that once we move into a small surplus we find ways to spend that as well," he said.

"Of course, that's really risky given that not only do we have to pay back what [debt] we've accrued, but we also have an ageing population and other longer-term liabilities."

Tax cuts could jeopardise 'modest surplus'

Mr Anthony wrote his budget forecast before the Treasurer revealed the Government would drop its planned Medicare levy increase to help fund the National Disability Insurance Scheme.

The economist said that move puts the planned 2020-21 surplus at risk.

"It creates a $4-5 billion hole for the Government to fill and, presumably, how it's filled that hole is through assuming stronger economic growth than we have in our numbers," he said.

"So there'll be some work to do to even achieve a very modest surplus in '20-21."

Mr Anthony is also wary of long-term tax cut promises that rely on continued economic improvement.

"Really what is the point of discussing tax cuts on the never-never, which apparently the Government is thinking about," he said of the reported plan to lower personal income taxes over a decade.

'Rosy path to surplus hinges on strong economy'

Even assuming future governments can resist the urge to increase spending or cut taxation, Mr Anthony said the budget would remain vulnerable to slipping back into the red.

"There's a whole lot of good things that you have to assume to generate that material surplus," he said.

"So that's a stable business cycle; no economic shocks from offshore; no major adjustment in housing markets and household consumption in the Australian economy and, in particular, in Melbourne and Sydney; and, perhaps, no foreign policy misadventure."

Mr Anthony explained that means the federal budget is likely to remain in a structural deficit, albeit one that is shrinking, for the foreseeable future.

A structural deficit is where the budget is in the red when analysts assume that the economy grows around its long-term average and the terms of trade — the price Australia receives for its exports relative to the cost of imports — is at typical levels.

Mr Anthony said Treasury's budget forecasts currently assume terms of trade that are 48 per cent above the long-term average.

He said the federal budget is probably still in a structural deficit of about $40 billion, or 1.5-2 per cent of GDP, and remains extremely vulnerable to an economic downturn.

"A recession on top of that would guarantee large deficits again and significant uplift in net debt," he said.

"So, therefore, that rosy path back to surplus really hinges on maintaining strong and steady activity in the Australian economy."

Australia's budget 'never really recovered' from Howard

As for how Australia got to its precarious budget position, Mr Anthony laid the blame squarely at the feet of former treasurer Peter Costello and prime minister John Howard.

His figures show that, mainly during the latter half of the Howard government, $145 billion was lost through tax cut decisions and $200 billion through increased spending for a total budget slippage of $345 billion.

"A combination of spending and tax cuts and that, of course, essentially squandered the proceeds of the mining boom, really squandered the future proofing of this economy, and from that we have never really recovered fiscally," he said.

Mr Anthony said the Rudd and Gillard governments also contributed to the increase in deficits, increasing spending by $121 billion through policy decisions while only raising tax by $48 billion for a $73 billion budget slippage.

On his calculations, the Abbott and Turnbull governments have been the most fiscally responsible in recent times, with $13 billion in tax increases offsetting $14 billion more spending.

"They've shown remarkable discipline in their efforts to drive the budget back into surplus," Mr Anthony said.

"Basically they just say no to new spending, other than infrastructure."