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Australia's chances of racking up a record $1 trillion in government debt have receded after Labor pumped billions of dollars worth of windfall revenues into the budget bottom line.
Treasurer Jim Chalmers has frequently castigated the former coalition government for leaving Labor with "one trillion dollars of debt".
Gross debt as measured by the Treasury borrowings was on track to crack that milestone in 2023/24.
But it's not projected to top $1 trillion for another two years, updated Treasury forecasts reveal.
"Because we are returning most of the welcome improvement in revenue to the budget, debt will be almost $300 billion lower by the end of the medium term, saving $83 billion in interest costs over the next 12 years," Dr Chalmers said in his budget speech on Tuesday.
In the shorter term, the interest bill over the four years to 2025/26 will be $9.9 billion lower than expected in October, according to the budget papers.
Gross debt is expected to rise steadily from $887 billion in 2023/24 to $1.02 trillion in 2025/26 before peaking at $1.07 billion, or 36.5 per cent of output, the following year.
Net debt, which takes into account the positive financial impact of certain government assets, will peak at $702.9 billion in 2026/27 from $574.9 billion in the next financial year.
