Treasurer Wayne Swan may only need to do some modest tweaking to reach his promised budget surplus in 2012/13, the chief economist at the nation's biggest home lender says.
And Commonwealth Bank Of Australia's (CBA) Michael Blythe doubts that promised new savings by the government will be significant enough on their own to open the way for another interest rate cut by the Reserve Bank of Australia.
In his forecasts for the mid-year budget review, Mr Blythe is forecasting a modest budget deficit of $500 million in 2012/13, rather than the $3.5 billion surplus predicted by the Mr Swan in the May budget.
He is expecting a larger deficit of $25.6 billion for this financial year, instead of the forecast $22.6 billion, and does not forecast a surplus until 2014/15.
Mr Swan has repeatedly said he is determined to bring down a surplus as promised, and that there will be new savings announced when he hands down his Mid-Year Economics and Fiscal Outlook (MYEFO) any time soon.
But Mr Blythe told AAP that if his numbers were anywhere near right, Mr Swan would only need to do a "little tweaking" and a "little bit of saving here and there".
"Certainly the way (the government is) talking, it sounds like a worse outcome than our figures, unless that is just the massaging of expectations that we always get around this time," he said on Friday.
Other forecasters have predicted a 2012/13 deficit ranging from nearly $2 billion to as much as $6 billion, primarily due to a softer than earlier thought economic growth, and because of policy initiatives like the carbon tax compensation package that were not included in the May budget.
Still, Mr Blythe said there was already a very significant fiscal contraction underway, and that has been reflected in the RBA's interest rate policy thinking and statements for quite a while, and doubts further savings would prompt another rate cut.
"You would need something dramatic to change that backdrop," Mr Blythe said.
He expects Treasury to cut its economic growth forecasts in MYEFO to around the RBA's new predictions released earlier this month - to 3.25 per cent for both 2011/12 and 2012/13 from previous expectations of 4.0 per cent and 3.75 per cent respectively.
Given Treasury has had a few extra weeks to put its forecasts together, it is unlikely to have higher numbers than the RBA given the impact that Europe's growing debt crisis is having on the global economy.
RBA governor Glenn Stevens told a Sydney conference yesterday that the financial situation in Europe has reached a stage where urgent policy action was required.
"We're fast coming to a point where parties who have to come up with a solution have to hurry up and do it," he said.
RBC Capital Markets head of Australian and New Zealand strategy Su-Lin Ong believes events in Europe in recent weeks support another 25 basis point cut in the cash rate to 4.25 per cent when the RBA board meets on December 6, especially as it traditionally does not convene in January.
She expects further reductions in the rate to 3.75 per cent in 2012.
"Given the lack of progress in Europe and political consensus, the risk is, arguably, skewed to a larger easing cycle than 100 basis points in 2011/2012, and sooner rather than later," she said.
