Australia's government says it plans to reduce its budget deficit by more than half in three years while maintaining momentum in a sluggish economy with personal and business tax cuts.

Treasurer Scott Morrison revealed on Tuesday that the deficit for the current fiscal year that ends on June 30 is expected reach 39.9 billion Australian dollars ($30.7 billion). That is AU$4.8 billion worse than was forecast a year ago as the Australian economy has been buffeted by China's slowing demand for iron ore and coal.

In its latest economic blueprint, the government plans to reduce Australia's deficit to AU$37.1 billion next year and to AU$15.4 billion by 2018-19.

Net debt would peak at a 19.2 percent of GDP in 2017-18.