Final budget outcome figures for the 2023/24 financial year will show gross debt levels fall to $906.9 billion, an improvement of $149.1 billion from the 2022 pre-election forecast.
The figures, expected to be released in full by the end of September, are also expected to show a budget surplus for the last financial year in the mid-teens, compared to the $9.3 billion put predicted in the May federal budget.
Treasurer Jim Chalmers said the levels of government debt were 10.6 percentage points of GDP lower than when Labor came to office.
"Through responsible economic management and spending restraint we've been able to get rid of a big chunk of the debt left to us by the Liberals and Nationals," Dr Chalmers said.
"Lower debt saves taxpayers on interest costs, helps in the fight against inflation and makes more room in the budget for what matters most like Medicare, aged care and defence."
Analysis from Treasury has shown the lowered debt level would likely save about $4 billion in interest costs during the past financial year and $80 billion over the decade.
The treasurer said the larger surplus was due to less spending.
"It's an important way to take pressure off inflation, rebuild fiscal buffers during a time of global economic uncertainty and build a better foundation to fund our nation's most pressing priorities," he said.
Ahead of the Reserve Bank meeting on Monday and Tuesday to decide on interest rates, Dr Chalmers has been challenged to overrule the central bank and lower the cash rate to get contentious changes to the financial body over the line.
RBA Governor Michele Bullock and the board will meet to discuss the economy over two days. (Steven Markham/AAP PHOTOS)
The Greens have said they won't support proposed government reforms to the Reserve Bank unless the official cash rate is brought down.
Greens senator Nick McKim said if the Reserve Bank does not lower rates from its current level of 4.35 per cent, Â the treasurer should intervene and make the reduction.
While the federal government has the ability to step in and overrule the Reserve Bank, such powers have never been used.
"The treasurer has the power to step in, he's just not using it. The Reserve Bank could act, but they are not acting. Mortgage holders are getting smashed right now," Senator McKim said.
"For weeks the treasurer has acknowledged the economy is being smashed, and that mortgage holders are being smashed by high interest rates, yet to date he's done nothing about it despite having the power to reduce interest rates.
"We aren't going to pass Labor's Reserve Bank reforms until interest rates are cut."
Under the reforms, which were suggested in a 2023 review, the Reserve Bank's board would be split into one that examined monetary policy while the other would look at operations and governance.
