By Jacob Shteyman and Samantha Lock in Canberra

A signature housing policy is set to be expanded to higher income earners to give more Australians a leg-up into the market, the government says ahead of its fourth federal budget.

Under changes to the Help to Buy scheme, the Albanese Labor government will lift income and price caps to make it easier for first-time buyers to secure a home.

It means single parents and couples earning up to $160,000 will be able to buy million-dollar homes in some of Australia’s biggest cities with a minimum two per cent deposit if they co-purchase them with the government.

Housing Minister Clare O’Neil said the shared equity program would allow 40,000 eligible buyers “who would otherwise have no chance of home ownership” to secure a home with federal government contribution.

“We’ve got a generation of young people growing up in our country who can’t see a pathway to home ownership, and our government wants to change that,” she told reporters on Saturday.

With equity assistance of 40 per cent for new homes and 30 per cent for existing homes, homebuyers would be able to buy with a smaller deposit and mortgage.

The scheme was previously only eligible to singles earning up to $90,000 and couples or households with a combined income of up to $120,000.

The income threshold will be bumped up to $100,000 for singles and $160,000 for combined incomes and single parents.

The maximum price of a home eligible to participants will also be raised from $950,000 to $1.3 million in Sydney, from $850,000 to $950,000 in Melbourne and from $700,000 to $1 million in Brisbane and the Gold Coast.

Price caps in rural areas will also increase.

The government has also pledged to speed-up housing construction with a $54 million investment in manufacturing prefabricated and modular home construction.

“We’ve got a big goal to build 1.2 million new homes in five years and to reach that we need to build homes in new ways – using methods like prefab we can build homes up to 50 per cent faster,” Ms O’Neil said.

Cost-of-living relief will be the other big budget focus, Treasurer Jim Chalmers said.

“So it will have that familiar combination of relief, repair and reform in the fourth budget, the same as it did in the third,” he told reporters on Friday.

“It will be a very responsible budget.”

After a surplus of $15.8 billion in 2023/24, Commonwealth Bank’s new chief economist Luke Yeaman expects to see an underlying budget cash balance that’s $22.5 billion in the red for 2024/25.

That’s at least an improvement on the $26.9 deficit predicted in the December mid-year update.

Veteran economist Saul Eslake says the run-up to the budget has been one of the most low-key he’s observed in his 45-year career.

He predicts it will almost certainly include some additional energy bill relief.

There’s no provision to extend the existing $300 rebates for households and $325 for businesses, meaning prices will skyrocket when they run out at the end of June.

And consumers are set for more bill shock after the Australian Energy Regulator’s recommendation to allow benchmark electricity prices to rise by up to 8.9 per cent.

The government faces a delicate balancing act, said Mr Yeaman, who until recently was intimately involved in delivering the budget as Treasury deputy secretary.

“There will be pressure to loosen the purse strings further weeks out from an election campaign,” he told AAP.

“However, too much spending risks undermining claims of ‘responsible economic management’ and giving the RBA a potential excuse to delay further interest rate cuts.”