In next week's Mid-Year Economic and Fiscal Outlook, Jim Chalmers will reveal expected growth in business investment this financial year has doubled from 1.5 per cent to three per cent since pre-election budget forecasts were released in April.
Business investment is then expected to grow by 1.5 per cent in 2026/27.
An extract of the budget update, released on Thursday, said lower financing costs, rising private demand and high-capacity utilisation had created a more favourable investment environment.
Australian Bureau of Statistics figures showed investment by IT firms in equipment and machinery - which includes servers and networking infrastructure housed in data centres - nearly doubled to $2.8 billion in the September quarter.
Dr Chalmers said the improved forecast showed business investment was burgeoning under Labor.
"The private sector recovery that we've been planning for and preparing for is really taking shape," he said in a statement.
Revitalising stagnant business investment has been a key plank of Dr Chalmers' second-term agenda to get productivity growth moving from 60-year lows.
Business investment helps boost productivity by deepening the amount of tools and equipment available to each worker.
By driving the adoption of artificial intelligence, more data centre investment could boost productivity, but the extent of the impact remained unclear, Reserve Bank governor Michele Bullock said on Tuesday.
Getting productivity growth back on track will help the RBA get inflation under control, allow the economy to grow faster and, eventually, boost the government's bottom line.
But more than a modest increase in business investment is needed to get the budget back in black.
Deloitte Access Economics' Stephen Smith and Doug Ross estimated the federal budget deficit would blow out to $44.6 billion by 2028/29.
Treasury's latest forecasts do not see the budget returning to balance until 2035/36.
"Escalating spending pressures and an outdated tax system are expected to mean budget deficits as far as the eye can see," Mr Smith and Mr Ross said.
The government needed to show discipline by imposing tighter spending controls and sweeping tax reforms that incentivised investment and reduced intergenerational inequality, they said in Deloitte's Budget Monitor.
Deloitte's recommendations included simplifying personal income tax, lowering company tax rates to 20 per cent while introducing a tax on "super profits", raising the GST, lowering the capital gains discount, and introducing a 10 per cent tax on inheritances above $100,000.
Driving the growth in government spending to the highest proportion of GDP in 40 years, excluding the pandemic, has been dramatic growth in services such as childcare and the $52 billion NDIS.
As a result of the rise in these in-kind payments, which deliver benefits to all Australians regardless of income, the budget has become less targeted towards poorer households, according to research by the E61 Institute, an independent think tank.
Between 2000 and 2024, in-kind payments climbed from 1.4 per cent to 3.7 per cent of GDP, while means-tested income support payments like JobSeeker and the Family Tax Benefit fell from 7.8 per cent to 5.3 per cent of GDP.
Dr Chalmers said there were positive reasons for the relative decline in income support payments.
The unemployment rate is lower than in 2000, meaning less reliance on JobSeeker, while the superannuation system had taken over the heavy lifting from pensions.
He acknowledged the NDIS was putting substantial pressure on the budget and said the government was taking steps to make the scheme more sustainable.
