The Reserve Bank and government are finally starting to move in the same direction to boost the economy, but this year's budget has dragged its heels on meaningful tax reform.
That's the assessment on this year's budget from leading economists.
The Turnbull government has trimmed its forecasts for economic growth next financial year to 2.5 per cent, from the 2.75 per cent it had tipped less than six months ago.
Sluggish wage growth and weak inflation are putting pressure on the economy as it continues its transition away from the mining boom.
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Budget 2016: Winners and losers
So the government is pinning its hopes on businesses to jump start the economy by encouraging firms to invest and hire more staff.
It's unveiled a $9.2 billion package of tax breaks to help small and medium enterprises over the next 10 years.
But JP Morgan chief economist Sally Auld said it's not enough just to do bits and pieces on tax reform - governments need to look at the whole picture.
"Fiddling at the margins with a little bit of bracket creep here and little bit of super change there doesn't really address the fundamental issue," she said.
The government could just be trying to shore up its credentials as a prudent economic manager, but whether that'll be enough to get the coalition over the line at the upcoming double dissolution election is anyone's guess, she added.
CommSec chief economist Craig James agrees there needs to be a meeting of minds between the major political powers during the next term in getting genuine tax reform.
"That's what's missing in this budget, though it was never likely to happen just ahead of an election," he said.
Genuine tax reform means lowering income tax rates, increasing the GST and striking a better balance for the economy, he said.
Australia's economy grew at a stronger-than-expected 3.0 per cent during calendar 2015, faster than other major economies including the United States and Britain.
However data released last week showed that quarterly consumer prices dipped for the first time since the global financial crisis.
In response, the Reserve Bank on Tuesday cut its cash rate to a new record low of 1.75 per cent, just hours before Treasurer Scott Morrison handed down his first budget.
CommSec's Mr James said monetary and fiscal policy are finally starting to move in lockstep to stimulate economic growth and lift jobs.
The RBA has repeatedly called on the government to introduce policies to accompany the central bank's heavy lifting in cutting rates.
Mr James said the budget lacked the usual pre-election bells and whistles and came across as "stodgy and workmanlike".
He described the budget's economic forecasts as conservative.
In his budget papers, Mr Morrison downgraded inflation forecasts to two per cent in 2016/17 from the 2.25 per cent forecast given during the government's mid-year budget update in December.
Meanwhile, the jobless rate is set to drift lower to 5.5 per cent over the next year from 5.7 per cent in March.
"Treasury has been somewhat conservative over the last couple of years - it worked well for them the year before," Mr James said.
"That means the budget bottom line has greater chance of being realised."
The budget deficit for 2015/16 is now expected to be a hefty $39.9 billion - the fifth largest on record - and more than the $37.5 billion predicted in the mid-year review.
And the government's deficit forecast for the next year has blown out to $37.1 million, with no surplus in sight until next decade.
