Lower debt levels give space ahead of 'big pressures'

Australia's falling debt levels are expected to provide some much-needed breathing room as financial pressures loom.

Final budget outcome figures for the 2023/24 financial year will show gross debt levels fall to $906.9 billion, an improvement of $149.1 billion from the 2022 pre-election forecast.

Finance Minister Katy Gallagher said her government's economic management had helped the nation avoid $80 billion worth of interest payments over the decade.

"Debt is lower, we're paying less interest and because we're paying less interest, it gives us more room in the budget to fund some of those big pressures that we've got coming at us," she told reporters in Canberra on Monday.

"We are making those tough decisions ... getting debt back in better shape, and lowering our interest payments - which, on their own, can exceed some of the government programs."

The figures, expected to be released in full by the end of September, are also expected to show a budget surplus for the last financial year in the mid-teens, compared to the $9.3 billion put predicted in the May federal budget.

Treasurer Jim Chalmers said the levels of government debt were 10.6 percentage points of GDP lower than when Labor came to office.

"Through responsible economic management and spending restraint we've been able to get rid of a big chunk of the debt left to us by the Liberals and Nationals," Dr Chalmers said.

"Lower debt saves taxpayers on interest costs, helps in the fight against inflation and makes more room in the budget for what matters most like Medicare, aged care and defence."

The treasurer said the larger surplus was due to less spending.

"It's an important way to take pressure off inflation, rebuild fiscal buffers during a time of global economic uncertainty and build a better foundation to fund our nation's most pressing priorities," he said.

Ahead of the Reserve Bank meeting on Monday and Tuesday to decide on interest rates and the monthly inflation figures release on Wednesday, Dr Chalmers has been challenged to overrule the central bank and lower the cash rate to get contentious changes to the financial body over the line.

The Greens have said they won't support proposed government reforms to the Reserve Bank unless the official cash rate is brought down.

Greens senator Nick McKim said if the Reserve Bank does not lower rates from its current level of 4.35 per cent, the treasurer should intervene and make the reduction.

While the federal government has the ability to step in and overrule the Reserve Bank, such powers have never been used.

"The treasurer has the power to step in, he's just not using it. The Reserve Bank could act, but they are not acting. Mortgage holders are getting smashed right now," Senator McKim said.

"For weeks the treasurer has acknowledged the economy is being smashed, and that mortgage holders are being smashed by high interest rates, yet to date he's done nothing about it despite having the power to reduce interest rates.

"We aren't going to pass Labor's Reserve Bank reforms until interest rates are cut."

Under the reforms, which were suggested in a 2023 review, the Reserve Bank's board would be split into one that examined monetary policy while the other would look at operations and governance.

But Senator Gallagher has said the Greens have offered the government a "crazy economic ultimatum" that could push Labor into discussions with the opposition.

"It's ridiculous that after 30 years of stable, good economic architecture in this country, they would be seeking to undermine that with this position," she said.

"It's a populist position, they're out craving votes, they're not actually serious about any economic policy."