Universities and new migrants are among those being targeted for savings to help the Government improve its budget position.

The Mid-Year Economic and Fiscal Outlook (MYEFO) shows this year's federal deficit has improved by $5.8 billion compared to forecasts in the May budget, but it is still going to hit more than $23 billion.

Key points: Wage growth downgraded across next four years, but deficits lowered every year until 2020/21

Wage growth downgraded across next four years, but deficits lowered every year until 2020/21 Higher education reforms tweaked to cap funding for student places, compromise on income threshold for paying off loans

Higher education reforms tweaked to cap funding for student places, compromise on income threshold for paying off loans New migrants will now have to wait three years to access welfare payments

The savings measures include finding $2.1 billion by capping funds for universities.

The Senate has refused to pass the original higher education savings, outlined in the May budget, which aimed to cut $2.7 billion

To get around the Senate roadblock, the Government has tweaked its approach.

Students will be asked to start paying back their loans when they earn $45,000 a year — $10,000 less than the current threshold of $55,000.

MYEFO also has a two-year freeze on the Commonwealth Grants Scheme to universities and a cap on funding for student places.

That could force universities to put a limit on the number of places they offer prospective students.

Treasurer Scott Morrison said the freeze did not need to be approved by the Senate, but the new limit for paying back student loans and the lifetime limit both need Senate support.

A lifetime limit on student loans will also be imposed.

The maximum will be about $104,000 for most students and $150,000 for medical, dentistry and veterinary courses.

Labor's Treasury spokesman Chris Bowen called the higher education cuts an attack on one of the "sources of Australia's long-term prosperity".

Mr Bowen criticised the plan for hitting students from lower socio-economic backgrounds.

"The Labor Party in office opened the door to opportunity to thousands of Australians to attend university. Malcolm Turnbull appears intent on slamming the university door shut," he said.

New migrants to wait longer for welfare

The other big new savings measure in Monday's announcement is that new migrants will have to wait an extra year to be eligible for welfare.

The Government is factoring in a $1.2 billion saving by making new migrants wait three years for payments like family tax, parental leave and carers' allowance.

Mr Bowen said Labor had concerns about the change and would be examining it closely.

"We obviously are deeply concerned about any impacts on those who can least afford it," he said.

There is also a big crackdown on family daycare integrity, aimed at saving around $1 billion over the next four years, after a number of rorts in the sector.

The budget update revealed that the forecast for wage growth has been downgraded across the next four years and growth will also be slower.

But the Federal Government said it would still deliver lower deficits this year and every year through to the end of the 2020/21 financial year — the first year a surplus is forecast.

Labor attacked the Government's economic management, saying the $23.6 billion deficit was eight times worse than the $2.8 billion deficit in its 2014 budget.