The upcoming federal budget, to be released next week, will contain the smallest revenue upgrade in this term of government - by far - Treasurer Jim Chalmers has confirmed.
That meant fewer choices for what the nation can afford to spend money on and an even bigger premium on responsible economic management, Dr Chalmers said in a speech on Tuesday.
Economists have speculated in recent days that the budget will show a substantial upgrade to Treasury's revenue forecasts from its December mid-year update, albeit smaller than in previous years, due to stronger commodity prices and labour market outcomes.
Dr Chalmers hosed down those predictions, saying Treasury doesn't expect its December forecasts to change substantially.
"Some commentators have made wild and wide-of-the-mark predictions about big surges in revenue," he told the Queensland Media Club.
"Some wrongly predict the tax-to-GDP ratio will go up this year, when Treasury expects it to be stable or even a bit down.
"What you'll likely see in the budget is that Treasury expects any upgrade next week to be about a sixth of the average of our budget updates.
"This will constrain our choices and put an even bigger premium on what's responsible, affordable and achievable."
But Australia's budget has turned a corner, despite weathering political and actual storms, with a tropical cyclone, a sluggish Chinese economy and US tariffs battering the nation's finances, Dr Chalmers said.
A soft landing was in sight, with inflation and interest rates on the way down.
Meanwhile, unemployment was still low and Australia had avoided a recession: an "exceptional" combination, especially when you look at the floundering New Zealand economy.
"This is a time of serious volatility," Dr Chalmers said.
"The whole world has changed."
Global growth over the next three years is expected to be its weakest since the 1990s as trade barriers, such as America's new 25 per cent tariffs on steel and aluminium, pull the handbrake on growth.
While tariffs will directly impact Australian GDP by less than 0.02 per cent by 2030, the indirect consequences could result in a 0.1 per cent hit to GDP by the end of the decade, Treasury estimates.
"In a world of retaliation and escalation, the impacts of tariffs are amplified, they linger for longer," Dr Chalmers said.
"Our response to this will not be a race to the bottom on tariffs.
"We'll go for more resilience, not more retaliation."
Australia has already reached out to other nations affected by the tariffs in a bid to diversify and expand trading relationships, and the budget will include money for a "buy Australian" campaign in a boost to local producers.
Dr Chalmers announced $1.2 billion in extra recovery funds in the aftermath of ex-tropical cyclone Alfred, on top of $11.6 billion blocked out for disaster support at the mid-year economic and fiscal outlook.
The disaster's financial impacts are still being calculated, but it has already dealt a billion-dollar hit to GDP, caused the economy to shed 12 million work hours, and could dent quarterly growth or heat up inflation.
Since MYEFO in December, the government has already announced more than $18 billion in new spending, including its $8.5 billion boost to Medicare, student debt relief and $7.2 billion for the Bruce Highway.
The Deloitte Access Economics' Budget Monitor forecasts a $26.1 billion underlying cash deficit and revenue downgrades of $11.3 billion over four years.
The projection is slightly smaller than the $26.9 billion deficit predicted in the December mid-year economic and fiscal outlook.
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