Hopes that the federal government will provide more cost-of-living relief before Christmas have been delivered a blow after Treasurer Jim Chalmers warned the mid-year budget update will not include "heaps of new initiatives".
Dr Chalmers said the mid-year economic and fiscal outlook, due to be released in the week beginning December 11, would show a "really substantial improvement in the [budget] bottom line" but he talked down the prospects of a second consecutive surplus or big handouts to embattled households.
"There won't be heaps of new initiatives like we saw in the May budget or the October budget before that. It will be more like a traditional mid-year update," the Treasurer told ABC radio.
The government is coming under increasing pressure, including from within its own ranks, to provide more assistance to households bearing the brunt of high inflation and 13 interest rate hikes.
It is also facing demands that it scrap or modify the stage-three tax cuts due to come into effect in mid-2024 amid warnings the $313 billion measure will exacerbate price pressures in the economy.
Independent MP Monique Ryan said the tax cuts would "light a match under inflation" and should be modified.
"If we're going to spend that much money in an inflationary environment, we should spend it on immediate relief for families and small businesses across the country," Ms Ryan said. "We certainly should not be rolling out tax cuts that mostly go to our highest-income earners."
She backed suggestions to retain the 37 per cent tax threshold and redirect the $8 billion saved to build more social housing and double rent assistance.
Dr Chalmers, who was due to meet with a group of Labor MPs on Thursday about living cost pressures, said the government had already rolled out "billions of dollars" in assistance and flagged that more could be expected in budget in May 2024.
But he reiterated the government's intention to continue with the stage-three tax cuts.
"We do understand that people would like us to do that [change the tax cuts]. We haven't changed our position," the Treasurer said. "We have found better and sooner ways to help people who are doing it toughest."
Dr Chalmers dismissed concerns that the tax cuts would fuel inflation by increasing disposable income, saying they had been factored into the Reserve Bank's forecasts.
The Organisation for Economic Cooperation and Development reckons that interest rates have peaked and predicts they will start to come down from the September quarter next year to reach 3.6 per cent by the end of 2025.
The thinktank predicted inflation would continue to decline, albeit gradually, without the need for any further interest rate hikes.
The annual inflation rate slowed to 4.9 per cent in October, according to the Australian Bureau of Statistics, down sharply from the previous month.
Reflecting this, markets have slashed the chances of a December rate rise from 10 to 2 per cent and have wound back expectations of further rate increases next year.
But Opposition treasury spokesman Angus Taylor said families were still being hit with "enormous price rises" and said underlying inflation had barely shifted in October, easing from 5.4 to 5.3 per cent.
"Australia has the stickiest, most persistent inflation of any advanced country. We have amongst the highest levels of inflation [and] we've seen the sharpest drop in household disposable income," Mr Taylor said. "We've got a long way to go."
The hopeful outlook for borrowers on interest rates comes amid forecasts of further improvement in government finances.
Commonwealth Bank chief economist Stephen Halmarick has said the government is on track to deliver a second consecutive budget surplus this financial year, mainly because of soaring income and company tax receipts.
But Dr Chalmers talked down the prospects of another surplus.
"People shouldn't anticipate that we will print a second surplus in that mid-year budget update. They should expect to see a really substantial improvement in the bottom line but we're not yet forecasting that second surplus," he said.
The OECD urged the government to consider further cuts to superannuation tax breaks and an increase in the GST to help meet the rising costs of an ageing population and the energy transition.
But the Treasurer said raising the GST was "not something that we're interested in".