Australia’s budget has a cost-of-living mountain to climb to sway voters

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Australian Prime Minister Scott Morrison speaks to the media at the Melbourne Commonwealth Parliament Office in Melbourne, Australia February 11, 2022. Darrian Traynor/Pool via REUTERS/File Photo

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SYDNEY, March 29 (Reuters) – The Australian government is hoping to use budget giveaways to offset cost-of-living pressures for disgruntled voters ahead of an election scheduled for May, but consumer sentiment may already be too gloomy to that the scheme gains ground.

Treasurer Josh Frydenberg flagged one-time cash payments for retirees and a temporary reduction in fuel taxes, among other measures, is likely in his 2022/23 budget later Tuesday, along with the usual pre-election infrastructure spree.

Economic growth forecasts are set to be revised upwards, with unemployment hitting a 60-year low of 3.75% later this year. The budget will also tip an acceleration in annual wage growth to a ten-year high, though such projections are notoriously unreliable, having exceeded reality for years.

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Prime Minister Scott Morrison’s National Liberal Coalition hopes all the good humor will revive its standing in the opinion polls, where it is trailing far behind the opposition Labour.

The bar is high, however, as ANZ Bank’s latest consumer survey showed sentiment on personal finance to be the bleakest since the depths of the pandemic in May 2020.

“Consumer confidence is very weak given the strength in employment, which we believe is directly linked to concerns about cost of living pressures,” said David Plank, head of the Australian economy. at ANZ.

“It will be interesting to see whether the measures expected in the federal budget will give a boost to confidence.”

Consumer satisfaction is vital to the economy, as they have been the driving force behind the recovery. Data released on Tuesday showed retail sales jumped 1.8% in February, while bank card spending held up well in March. Read more

A further complication is that rising inflation is leading the Reserve Bank of Australia (RBA) to consider a record interest rate hike later this year, the first since 2010.

Analysts warned that Frydenberg should be careful not to over-stimulate in the short term, as that would only increase pressure for an earlier RBA move.

An increase in borrowing costs would certainly not be welcomed by Australian households who, overall, are holding record amounts of mortgage debt.

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Reporting by Wayne Cole Editing by Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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