Australia's government on Wednesday trimmed its likely budget deficit for the current fiscal year, but flagged bigger shortfalls ahead due to "unavoidable spending" on health, cost-of-living relief and veterans care.

Australia has forecast a sizable deterioration in the government’s fiscal outlook as falling commodity prices, a weak Chinese economy, and spending commitments erode the budget’s bottom line.

Australia’s budget is expected to slip deeper into deficit in the years ahead due to rising government spending and a weakening in key trade partner China, a mid-year fiscal update showed, with a national election due in less than six months.

The government handed down its midyear budget update, which could be the last before the upcoming federal election.