The budget update to be unveiled next week will forecast a deficit of about $40 billion and a peak in debt of more than $400 billion.
The figures are well above the forecasts of $30 billion and $370 billion in the Treasury's pre-election budget update released just four months ago.
Most of the deterioration has been driven by the government itself and by the Senate rather than changed economic circumstances.
The biggest driver is the government's decision to top up the the Reserve Bank reserve fund, which will add $8.8 billion to the deficit.
The decision not to proceed with Labor's tightening of the fringe benefits tax on employer-provided cars will cost $1.8 billion over four years. The decision not to tax more heavily high superannuation earnings will cost $300 million. The decision to retain generous tax concessions for self-education will cost $270 million.
The budget will face unknown costs as a result of the government's decision to delay $5.2 billion of public service cuts and the decision of the Senate to delay a vote on the mining tax repeal bill, which also repeals $13 billion of associated spending on measures including the Schoolkids Bonus and the Low Income Super Contribution.
Labor's surprise decision to use the Senate to block spending cuts for higher education that it had previously proposed will cost $2.3 billion.
''It looks like something the last opposition did to the last government, blocking something it shouldn't,'' said Deloitte Access director Chris Richardson.
''People can dance their jig of joy all they like, but Australia is the loser. Our biggest problem is never the government, it tends to be the opposition.''
These measures will add to federal government debt, which is set to sail well past $400 billion rather than the $370 billion forecast during the election.
The Senate will consider a joint Greens-government proposal to scrap the debt limit on Monday, removing any impediment to further increases other than the requirement to report to Parliament each time gross debt climbs by a further $50 billion. The government's debt is set to break through the present $300 billion ceiling on Wednesday when the Treasury issues a tender for a further $800 million of bonds.
The midyear projections are expected to show the budget returning to a small surplus in 2016-17 before heading back into deficit.
''The deal with the Greens means the Treasury will publish 10-year projections. They will show the cost of the national disability insurance scheme and age-related spending climbing while revenue grows slowly,'' Mr Richardson said.
A Treasury working paper released on Friday says mining companies make up a much larger proportion of taxpaying companies than they used to and typically pay less of their profits in tax.
The Howard government's decision to stop indexing fuel excise in 2001 means the excise take is slipping as a proportion of the budget. By 2016-17 the decision will be costing $8.4 billion a year. A shift in drinking habits away from heavily taxed beer to lightly taxed wine costs the budget $580 million a year.