CANBERRA, AAP – Promises to assist households facing cost of living pressures in the federal budget have failed to lift the mood of Australians as they fret over the inflation outlook.
Treasurer Josh Frydenberg will hand down his fourth budget on Tuesday night, days out from the start of an election campaign.
The weekly ANZ-Roy Morgan consumer confidence index – a guide to future household spending – fell for a third straight week, down 0.1 per cent at 91.1.
At the same time, inflation expectations jumped by a further 0.4 percentage points to 6.4 per cent, the highest since June 2012.
“Consumer confidence is very weak given the strength of employment, which we think is directly linked to concerns over cost of living pressures,” ANZ head of Australian economics David Plank said.
“It will be interesting to see whether the measures expected in the federal budget provide a boost to confidence.”
The government has repeatedly promised a support package for households facing cost of living pressures, particularly from a spike in petrol prices to above $2 a litre.
There is an expectation the budget will include a temporary cut in the 44.2 cents per litre fuel excise.
Still, there was already some promising signs for motorists with a stabilisation in petrol prices in the past week after touching record highs the previous week.
The Australian Institute for Petroleum said the national petrol price average fell 5.8 cents last week to 206.7 cents per litre.
Mr Frydenberg told reporters heading into Parliament House the budget will show a material improvement in the bottom line, while predicting an unemployment rate below four per cent for the first time in nearly 50 years.
“We are banking the dividend of a stronger economy,” he said.
Economists are expecting an underlying budget deficit of between $80 billion and $70 billion for the 2021/22 financial year compared with the $99.2 billion shortfall predicted in the December mid-year review.
The unemployment rate is also predicted to be 3.75 per cent in the September quarter of this year, which would be the lowest level since August 1974 and in line with the Reserve Bank of Australia forecast.
In the mid-year review the jobless rate was forecast at 4.25 per cent for the 2022/23 financial year. The rate hit a 14-year low of four per cent in February.
“We have avoided the scarring of the labour market that is so reminiscent of previous recessions of Australia in the 80s and 90s,” Mr Frydenberg said.
Rising cost of living pressures and unsettled consumer confidence may be taking the gloss off retail spending which was a key plank in Australia’s economic recovery from the Delta COVID-19 variant late last year.
Shortly before the budget is handed down, the Australian Bureau of Statistics will issue retail trade data for February, with the consensus among economists pointing to a 0.9 per cent increase after the 1.8 per cent rise in January.