The Abbott government's budget bottom line is in slightly better health than expected just weeks away from its second budget.
New figures from the Department of Finance reveal the budget's underlying cash balance for the first nine months of the 2014-15 financial year is in deficit by $35.2 billion, which is $4 billion better than was expected in the government's mid-year budget update.
The Mid-Year Economic and Fiscal Update predicted the budget deficit would be $39.5 billion by this stage.
The vast bulk of the $4 billion improvement comes from lower than expected cash payments from the government.
But in a worrying sign, government revenue is $644 million less than was projected in December, primarily due to lower than expected taxation revenue.
The revelation comes just days after the governor of the Reserve Bank Glenn Stevens warned that the Abbott government had "little choice" but to accept a slower path of deficit reduction in coming years, thanks to the huge deterioration in Australia's terms of trade.
Mr Stevens said that, under current policy settings, there was likely to be a "persistent gap" between the government's permanent income via taxes and its permanent spending on the provision of goods and services.
Treasurer Joe Hockey also warned this week that the government would likely take longer to reduce the size of the budget deficit in absolute terms, though it still hoped to reduce the size of the deficit as a proportion of GDP.
Government figures released on Friday show the Abbott government has spent $4.7 billion less, nine months into the financial year, than it was expecting in December.
The government says lower supply of goods and services, grants, and personal benefits have contributed to the difference.
The government's highly-anticipated second budget is due on May 12, less than three weeks away.
