CANBERRA — The Australian government has provided an update on the nation's economic outlook, forecasting a $7.8 billion budget surplus by 2021.

China has been credited as a key player in the positive forecast with the country's strong manufacturing sector contributing to Australian commodity prices, notably that of iron ore, being higher than forecast.

Australian Treasurer Scott Morrison on Monday released the Mid-Year Economic and Fiscal Outlook (MYEFO), detailing new cuts to welfare and higher education.

Morrison said that strong commodity prices in 2017 and higher-than-forecasted company profits resulted in more tax being paid in Australia than expected, raising the projected 2021 surplus to $7.8 billion, up $2.06 billion from projections in the May budget.

The May budget made its forecasts based on an average iron ore price of $55 per metric ton but it has risen to as high as $80 per ton in the seven months since and currently sits at 70.

That alone has poured an extra $2.2 billion into Australia's economy. Despite the upturn, the Treasury department again forecast an average iron ore price of $55 per ton, indicating they expect prices to moderate.

The deficit for 2017-18 has been reduced to $18.07 billion, Morrison said, and will be slashed to $1.9 billion in 2019-20 before reaching surplus the following year.

The country has also benefited from the highest jobs growth in decades meaning fewer people were receiving welfare payments.

Mathias Cormann, Australia's Finance Minister, said the result was so good that the government could stop borrowing money to fund day-to-day business.

"That's a year earlier than anticipated at the time of the budget," Cormann told reporters in Canberra on Monday.

"It will be the first time since the global financial crisis."

The report also highlighted lower than expected spending as a key reason for the improvement.

"We had much lower-than-expected consumption growth in the September quarter, just 0.1 percent," Morrison said.

"There was, rightly, a lot of concern about what was happening with household living costs, particularly energy prices. That's why the National Energy Guarantee (NEG) and other measures have been put in place. We would hope to see better consumption figures going forward."

That fall in consumer spending was responsible for expected Gross Domestic Product (GDP) growth in 2017-18 to be revised down from 2.75 percent to 2.5 percent.

GDP growth is projected to rise back to 3 percent in 2018-19 and remain steady until 2020-21 at the earliest.

Morrison and Cormann also unveiled a series of cuts on Monday, including $1.6 billion' worth to the university sector.

The criteria that newly-settled immigrants have to tick before they are eligible for welfare payments have also been expanded, a measure the government said would save $920 million over four years.

The report was published as the Australian Taxation Office (ATO) revealed plans to pursue multinationals who pay no tax in Australia after it was revealed that more than a third of them do not do so.