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Expect political risks in Budget

Tony Abbott has promised the upcoming Budget will build on the "success" of last year's fiscal blueprint as signs grow the Government's debt will blow out beyond $500 billion.

The Prime Minister said last year's Budget, with many of its elements unlegislated or abandoned because of Senate opposition, was the start of a fiscal repair.

Revealing the Government would save $500 million from its success in stopping boat people arrivals, Mr Abbott said more political risks would be taken in the coming Budget.

"We made very important progress in last year's Budget and we'll build on that progress in this year's Budget," he said.

"While we didn't achieve everything we hoped to achieve in last year's Budget, we have at least halved Labor's debt and deficit in the years to come."

JP Morgan economists said yesterday they expected the deficit this year to blow out to $45 billion, rather than the $40 billion forecast in December.

They believe this year's deficit will be $42 billion, $13 billion worse than expected, with the Budget still facing a $24 billion shortfall in 2017-18. "It is likely it will be many more years before the Budget is back in the black," they said.

An analysis for a Liberal backbencher by the Parliamentary Budget Office estimated there were $112 billion worth of Budget measures yet to be legislated. They included some of the biggest long-term savings, including the change in indexation of the age pension.

That one change, which may be dumped, would save the Government almost $23 billion over the coming decade.

The JP Morgan prediction follows estimates by Deloitte Access Economics that the deficit will be $45 billion and total Government debt will sail past $500 billion early next decade.

Mr Abbott did not reject the Access prediction. But he gave an assurance his Government had a "strong and credible plan to repair the Budget".

He argued he had never "put a date" on a return to surplus, saying the focus was on bringing the Budget under control.

But before the election, he promised the Budget would be "on track to a believable surplus" within his first term on its way to a surplus of one per cent of GDP within a decade.

And in 2013 both he and Treasurer Joe Hockey pledged a surplus in their first year in office based on then projections.