CANBERRA, AAP – The final outcome for the federal budget in the 2020/21 financial year was an underlying deficit of $134.2 billion, Treasurer Josh Frydenberg says.

This compares with a forecast $161 billion deficit made at the time of the May budget.

“What is driving this improvement to the budget bottom line is more people in work and less people on welfare,” Mr Frydenberg told reporters in Canberra on Thursday via video link.

Since the May budget, the unemployment rate has fallen below five per cent for the first time in a decade.

“We recognise that since this final budget outcome, the economy has been hit by the Delta variant,” the treasurer said.

“But with the vaccination rates fast approaching the 70 and 80 per cent targets, restrictions will be eased, and what these numbers confirm is that when restrictions are eased, the Australian economy bounces back.”

The improvement in the budget position consisted of $20.1 billion in higher receipts and $6.7 billion in lower payments.

Mr Frydenberg said the improvement in receipts was driven by higher tax receipts on the back of a stronger labour market, increased consumer spending and higher commodity prices.

“Our effective fiscal management has been endorsed recently by comments by the IMF and the OECD and Australia retaining its AAA credit rating from the three leading credit rating agencies,” he said.