CANBERRA, AAP – Treasurer Josh Frydenberg says last week’s big spending budget is aimed at securing Australia’s economic recovery, pushing unemployment lower and building confidence to encourage households to spend.
Figures on Tuesday will give an idea as to whether he has been successful on the latter, with the weekly ANZ-Roy Morgan consumer confidence survey due.
As a guide, the latest Newspoll released at the weekend found 44 per cent of respondents believe Mr Frydenberg’s third budget will be good for the economy, while only 15 per cent thought it would be bad.
Confidence has been fairly wobbly in the past few weeks due to uncertainty surrounding the Perth COVID-19 lockdown and more recently the mystery virus case in Sydney, capping a spike to a 19-month high in April.
One factor driving confidence higher has been ultra-low interest rates.
The Reserve Bank will also release the minutes of its May 4 board meeting on Tuesday where it left the cash rate at a record low 0.1 per cent.
Since the meeting, deputy RBA governor Guy Debelle has delivered a major speech and the central bank has released its quarterly statement on monetary policy with its latest economic figures, suggesting the minutes may not offer much that is new.
What is clear, the RBA won’t be lifting interest rates anytime soon.
RBA governor Philip Lowe has repeatedly said the board will not raise rates until inflation is sustainably within the two to three per cent inflation target, an event he doesn’t expect until 2024.
To drive inflation, Dr Lowe says, unemployment needs to much lower than it is now and wages need to be growing above three per cent.
The budget forecasts wages only growing by 2.75 per cent by 2024/25 after either trailing or being flat to inflation before then.
Economists expect Wednesday’s wage price index for the March quarter – a key gauge used by the RBA and Treasury to measure wages growth – will show annual growth of only 1.4 per cent.
Treasury secretary Steven Kennedy, who is also a member of the RBA board, will deliver a lunchtime briefing on the budget to an Australian Business Economists event in Sydney on Tuesday.