At the same time, households are battling cost-of-living pressures and rising interest rates.
The 2026/27 federal budget outlines how Labor expects its key parameters to play out over the next four years.
DEBT
Taxpayers will be on the hook for $1.1 trillion in gross debt, as measured by government borrowings, in the new financial year.
This equates to about $39,700 for every person in Australia, based on a population of 27.7 million people.
At the same time, interest payments on government securities are set to total $27.7 billion in 2026/27.
Net debt - which offsets the positive financial impact of certain government assets - looks a little better.
It will hit $616.6 billion in 2026/27, before rising over the next three years to $767.8 billion.
BUDGET POSITION
The underlying cash balance for this 2025/26 financial year is likely to be $42.1 billion.
Then it's another sea of red for the next four years.
However, the deficit is expected to fall gradually and potentially reach balance in 2034/35.
The deficit forecasts below compare to the 2025/26 year.
* 2026/27 - $31.5 billion ($35.7b)* 2027/28 - $31.0 billion ($37.2b)* 2028/29 - $34.4 billion ($36.9b)* 2029/30 - $25.3 billion (not available)
Total deficit over the next four years: $150 billion
ECONOMY
The economy will falter due to the Middle East crisis, slowing to a 1.75 per cent growth pace in 2026/27, down from an estimated 2.25 per cent this financial year.
Here's how real gross domestic product, or economic output, will fare:
* 2026/27 - 1.75pct (2.5pct)* 2027/28 - 2.25pct (2.75pct)* 2028/29 - 2.5pct (2.75pct)* 2029/30 - 2.5pct (n/a)
INFLATION
Australia's last reading on inflation, for the month of March, was 4.6 per cent.
The consumer price index is expected to spike to five per cent in the middle of this financial year.
It should then ease to 2.5 per cent in 2026/27, where it will stay for the next three years.
Treasury has a worst-case scenario that would see inflation peaking above seven per cent, if the price of crude oil jumps to $US200 a barrel and doesn't drop fast enough.
* 2026/27 - 2.5pct (2.5pct)* 2027/28 - 2.5pct (2.5pct)* 2028/29 - 2.5pct (2.5pct)* 2029/30 - 2.5pct (n/a)
JOBS
Ahead of the budget, economists were concerned the crisis could hit the jobs market, with businesses laying off workers in bigger numbers.
But the outlook for actual jobs growth is positive, due to robust business investment.
Here's how the unemployment rate, which is currently at 4.3 per cent, looks over the next four years.
* 2026/27 - 4.5pct (4.25pct)* 2027/28 - 4.5pct (4.25pct)* 2028/29 - 4.5pct (4.25pct)* 2029/30 - 4.25pct (n/a)
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