Treasurer Josh Frydenberg has abandoned the coalition’s budget repair strategy as he prepares a big spending federal budget.

Mr Frydenberg will signal a major shift in fiscal policy in a speech to the Australian Chamber of Commerce and Industry on Thursday.

Old assurances about returning to surplus will be dropped, with most economists predicting the October 6 budget will show a deficit of more than $200 billion.

“It’s going to be sizeable but it reflects the challenge that we face,” Mr Frydenberg said ahead of his speech.

“We had no other option but to provide this economic support to the people who need it most, and as a result, Australia has fared so much better than other countries through this economic crisis.”

The treasurer will use his speech to outline a two-step strategy that offers financial support during the coronavirus recovery before rebuilding the budget while keeping taxes low.

A key plank of the plan will be maintaining the existing cap on taxes as a share of the economy, which is 23.9 per cent.

Mr Frydenberg insists the goal remains to claw Australia out of debt in his lifetime.

“But we know the economic shock has been like no other,” he said.

“Australia has fared a lot better than other nations, but there’s still a big hole in the economy.”

Ahead of the budget, the treasurer is promising an overhaul of bankruptcy laws to make it easier for small businesses to stave off administration.

Companies with liabilities of less than $1 million will be able to stay in control of their businesses.

The federal government expects a massive amount of company closures when emergency insolvency measures expire at the end of the year.

Mr Frydenberg said the insolvency changes would not hit the budget bottom line, but would help businesses trade out of the economic crisis.