At Monday's mid-year economic and fiscal outlook, the projected deficit for 2017-18 should appear healthier thanks to the benefit of stronger-than-forecast iron ore and coal prices. Compared to the May federal budget deficit forecast of $29.4 billion, the expected windfall in the current fiscal accounts reduces the deficit to about $24 billion to $27 billion, a number of economists estimate.

The government is working on trying to deliver a personal income tax cut to low and middle-income earners without deviating from its promise to restore a surplus. The budget update's improved revenue position should enable that.

The impact of softer-than-expected wage inflation is largely offset by the boom in jobs growth, which will support tax receipts next year.

Iron ore is fetching $US70.50 a tonne and Dalian futures are trading in positive territory.

"It seems to me the budget figures have been much better than expected recently, that gives you options," said Paul Dales, chief Australia and New Zealand economist at Capital Economics. "Most of it is the commodity price story," he said.

Westpac economists do not see a case for upgrading the budget's commodity price forecasts, which are $US55 a tonne for iron ore, free on board, and $US85 a tonne for thermal coal. The synchronised recovery in global activity means current economic growth forecasts remain credible, although Westpac advocates a downgrade to real GDP in 2018-19 because of the state of consumption, to 2.75 per cent from 3 per cent growth.

The cumulative deficits for the next four years are $40 billion on Westpac's numbers, $6 billion less than at May's budget. Westpac also estimates a package of modest tax cuts could cost $4 billion over four years.

ANZ economists have even floated the idea of reaching a cash surplus as soon as 2019-20, but that appears to exclude the impact of a fresh round of tax cuts inserted into the equation.

Doubt abounds

However, Capital Economics' view is that it would take a miracle for the Treasurer to return to surplus by 2020-21, and proceed with tax cuts, the effect being the surplus gets pushed further out. That is because Capital disputes the economic growth and inflation forecasts provided by Treasury.

"I don't think the economy is going to be quite as good as they expect, that's especially the case if there are tax cuts. It just seems to me it's quite challenging already," Mr Dales said.

All the same, Capital estimates the up to $9 billion windfall MYEFO will provide allows the Treasurer to adopt lower deficit projections, but not as low as he could apply given the instinct to keep some in reserve to fund tax relief for households.

Citigroup argues the result of Monday's update should mean a forecast return to surplus by 2020-21 is justifiable, but achieving this will be difficult and relies on assumptions about receipts that are overly optimistic relative to the pace of growth.

National Australia Bank economists do not think the ratings agency Standard & Poor's will act on its negative outlook with respect to Australia's AAA sovereign credit rating on the latest estimates and policy promises. But S&P will remain vigilant on Australia's promise to return to surplus.

Back in May, the ratings agency wrote of the 2020-21 target: "This substantial delay in fiscal repair, and the risk of further delay, raises our doubt over the ability of the Australian government to meet its fiscal objectives."

S&P also warned that weak inflation and wages could further dent the government's prospects of reaching a balanced fiscal position.