More than €1bn of tax cuts and €5.6bn in new State spending will be announced in the Budget on September 27.
The Government will also unveil a separate series of cost of living measures on Budget Day which will be introduced immediately.
This could include the renewal of the €200 electricity credit and a double welfare payment for people in receipt of benefits such as the jobseeker allowance, State pension or disability payments.
The Budget will be held on September 27, two weeks earlier than usual.
The Government has been under pressure from the Opposition to hold an emergency budget to address the cost-of-living crisis sparked by the war in Ukraine.
However, the Taoiseach had resisted demands to introduce new measures to ease the financial burden caused by rising fuel, energy and food prices.
But the Government leaders have now agreed to hold the Budget two weeks earlier than anticipated.
It was originally planned that the Budget would be held on Tuesday, October 11, but it will now be announced by Finance Minister Paschal Donohoe on September 27.
Mr Donohoe and Public Expenditure Minister Michael McGrath will today outline their spending capacity in the Budget.
Better-than-expected tax returns mean this year’s Budget will run a surplus and the revenue will be used to fund the immediate cost of living measures.
However, the Government will also loosen the purse strings with the aim of alleviating the pressure of inflation on the most vulnerable in society and the squeezed middle.
The Summer Economic Statement earmarked €6.7bn for tax cuts and new spending for the Budget.
This will include a record tax package of €1.05bn which will focus on increasing the entry point at which workers pay the top rate of tax. The remaining €5.65bn will be used to pay for new spending proposals, including a public sector pay deal.
However, there are concerns in the Department of Finance about the country’s reliance on corporation tax revenues.
The department’s economic statement describes the economy as “resilient” but warns “evidence is mounting that economic momentum is slowing”.
It says the strong rebound in the economy after the Covid-19 pandemic “paid dividends in the labour market, where the level of employment is now at its highest level ever”.
“By maintaining the employee-employer link during the pandemic, the Employment Wage Subsidy Scheme is one of the key factors behind the resilience of the labour market,” it sys.
However, it adds that exiting the pandemic has “not been entirely” smooth.
“The rapid recovery in demand has run up against supply (capacity) constraints, putting upward pressure on prices. The step-change in energy prices on foot of the Russian invasion of Ukraine has worsened the inflation situation,” it says.
It warns: “Public debt in Ireland is already very high, with significant fiscal challenges now firmly on the horizon.
“A higher cost of funding, alongside elevated debt levels, mean that tax and spending policies cannot be used to resolve all problems. Difficult choices will have to be made and Government will not avoid this.”
Meanwhile, a separate package of once-off cost of living measures will be announced alongside the Budget as the Government comes under increased pressure to tackle the rising cost of living.
The State will spend €400m before Christmas on cost of living measures and increases in pay for the public sector.
Mr Donohoe and Mr McGrath have decided to break spending rules this year to help households struggling with extraordinary levels of inflation.
However, they insisted that they will not be chasing inflation.
Some of the one-off measures are due to a corporation tax surplus, however, half of receipts are only from 10 companies with Mr Donohoe warning these receipts are “very volatile”.
“The best way of managing that risk is to get our books to balance and to move into a position over time where we are not using those corporation tax receipts on permanent expenditure,” he said.
The minister said the Government is “ready to act” to help struggling households.
“A key part of the challenges that households and businesses are facing all over our country, and Minister McGrath and I are fully aware of the challenges that they have posed for so many, is what we have seen with rising prices, and what that means for our standard of living,” he added.
“As far as the case in our last crisis of the Covid pandemic, the Government has shown time and time again, that we are ready to act when it's appropriate to do so.”
However, he said tackling rising inflation and helping with the cost of living will not be the same as Covid supports as inflation may be driven further.
Despite Taoiseach Micheál Martin telling his TDs and senators last week that the pension age should not go beyond 66, the Government has yet to make a formal decision on the Pensions Commission’s recommendation to gradually increase the age to 67 over a number of years.
Mr Martin said last week that he would instead be in favour of small increases in PRSI.
Mr McGrath said newly announced figures do not take into account any changes to the pension age.