“The global economy is uncertain, the global outlook is unsettling, and that’s weighing heavily on our economy.”

The last time company tax collections slipped from their budget forecast was in 2019-20 – then treasurer Josh Frydenberg had to deal with an $8.9 billion single-year collapse due to the impact of the pandemic. Chalmers’ downgrade will be milder and spread out over four years.

Economic growth also slumped, with the country enduring its biggest three-month contraction since the early stages of the Great Depression.

Growth has slowed sharply over the past 12 months but remains positive. Annual growth in 2023-24 was 1.2 per cent, compared with 2.4 per cent in 2022-23. Without population growth and government spending, the economy would have slipped into recession.

The mid-year update will also have to start accounting for the policy agenda of President-elect Donald Trump, who has threatened to impose tariffs of up to 20 per cent on imports to America. Already, he has threatened China, Mexico and Canada – America’s three largest trading partners – with extra tariffs.

At the weekend, the government revealed the budget would take a $1.8 billion hit over the next four years due to a faster-than-expected lift in payments flowing to the nation’s veterans. The May budget contained an extra $6.5 billion in veterans’ support as the government cleared a backlog of more than 60,000 cases left by the Morrison government.

Spending on natural disasters, including Tropical Cyclone Jasper, which hit Far North Queensland late last year, will also cost the budget about $2 billion.

On Monday, Housing Minister Clare O’Neil will announce the second round of funding from its Housing Australia Future Fund, which will fast-track the construction of 5000 new social homes nationwide.

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States and territories will have until the end of January to submit projects, which must add to the existing stock of social housing. Funding will be available on a “use it or lose it” basis and follows funding for 13,700 homes announced in September.

The public service has already been pressed into extra work in the run-up to the mid-year update, with staff pulled from non-Finance and Treasury sectors to lighten the load.

On Sunday, Chalmers said he and Finance Minister Katy Gallagher had been working simultaneously on the mid-year update and the March 25 budget.

“We work around the clock and around the year on these budgets,” he told Sky News.

“This work is more or less non‑stop. We’ve been meeting the expenditure review committee, some things are for the mid‑year budget update, some things are for March.”

But shadow treasurer Angus Taylor said the government should focus on policies that would reduce inflation and enable the Reserve Bank to cut official interest rates.

He said the country had endured an unprecedented seven consecutive quarters of negative growth per capita while spending was growing rapidly.

“This is a disastrous budget situation, which reflects the government taking us on a pathway to economic ruin,” he told Sky News.