The federal government has squirrelled away up to $16 billion in spending decisions to be unveiled between now and the federal election in a mid-year budget update which shows only a $2.3 billion improvement to the bottom line over four years, before a deterioration in deficits over the medium term.

The Mid-Year Economic and Fiscal Outlook, released on Thursday, also forecasts unemployment to fall sustainably below 5 per cent and wages growth to outstrip inflation over the four-year forward estimates.