Prime Minister Malcolm Turnbull has promised the federal budget will help Australians with the rising cost of living while guaranteeing the funding of essential services.
Personal tax cuts for low and middle-income earners are expected to be a feature of Treasurer Scott Morrison's third budget on Tuesday, although it is unclear what form they will take.
"We are doing everything we can to ease the burden of cost of living pressures on Australian families," Mr Turnbull told reporters in Sydney.
"That is why we have got, you will see tomorrow, important measures relating to tax and you will see important measures relating to energy."
The prime minister was announcing a $400 million project to duplicate the remaining single-track section of Sydney's Port Botany rail line as part of a road and rail infrastructure package that will also be a cornerstone of the budget.
The promise of personal income tax cuts has been flagged for months in what could be the final budget before the next federal election.
However, Mr Morrison has conceded they won't be "mammoth" but they will be affordable.
The Australian newspaper reported tax relief would come through increasing the low-income tax offset while the budget would promise tax cuts for higher income brackets by 2024.
At present workers with a taxable income less than $66,667 get this offset.
The maximum tax offset of $445 applies to incomes of $37,000 or less and this amount is reduced by 1.5 cents for each dollar over $37,000.
Finance Minister Mathias Cormann has also defended the coalition's decision to lock in a cap on the amount of tax revenue collected by the government.
The 23.9 per cent tax-to-gross domestic product limit will be written into the rules for the budget.
Senator Cormann said the "speed-limit" on the public tax burden, above which revenue is returned through tax cuts, would keep the economy strong.
But public policy think-tank The Australia Institute describes the cap as "entirely arbitrary".
"There is no objective reason why the government should set this cap. The objective of fiscal policy should be whatever is appropriate for the state of the economy," institute executive director Ben Oquist said.
Shadow assistant treasurer Andrew Leigh questioned what is looking like a big spending budget based on a company tax revenue windfall.
"You shouldn't make permanent decisions based on temporary changes in revenue," Dr Leigh told Sky News.
"This was one of the real problems of the Howard government, that they locked in unsustainable long-term budget decisions based on the first wave of the mining boom."