CANBERRA, AAP – The Reserve Bank of Australia and Treasury expect the unemployment rate will drop below four per cent in coming months to levels not seen since the early 1970s.

The most recent official figures show the jobless rate fell to four per cent, a level not seen for almost 14 years.

The skilled vacancy report from the National Skills Commission on Wednesday will provide a further update on the progress to getting more people into work.

Federal Finance Minister Simon Birmingham on Wednesday hinted next week’s federal budget will point to an unemployment rate below four per cent in 2022/23.

Some 200,000 fewer people are expected to be on the JobSeeker payment, reducing the government’s welfare costs.

“That is one of the fundamental dividends of a strong economy: that low unemployment rates give us the double bonus of lower payments on social safety net and higher revenue from Australians contributing and therefore paying taxes as part of those contributions,” Senator Birmingham told The Australian.

However, rising cost-of-living pressures and a downturn in consumer confidence is raising concerns over the outlook for household spending – a key plank for economic growth.

Figures released on Tuesday showed confidence has now sunk to levels last seen in September 2020 when Victoria was enduring the second COVID-19 wave.

At the same time, consumer inflation expectations have also hit their highest level in 11 years at six per cent, almost double the current annual rate at 3.5 per cent.

Surging petrol prices above $2 a litre as global oil prices rise on Russia’s invasion of Ukraine, as well as increases in other commodity prices, is the main factor behind escalating inflation pressures.

Reserve Bank governor Philip Lowe has warned inflation could hit at least four per cent, while economists believe it could reach five per cent or more.

Fitch Ratings believe the outlook for global growth has deteriorated significantly as inflation challenges intensify.

“Global inflation is back with a vengeance after an absence of at least two decades,” Fitch Ratings chief economist Brian Coulton said.

“This is starting to feel like an inflation regime change moment.”

Fitch has cut its world growth forecast for 2022 by 0.7 percentage points to 3.5 per cent, reflecting the drag from higher energy prices but also a faster pace of US interest rate hikes than previously anticipated.

It has also revised down world growth for 2023 by 0.2 percentage points to 2.8 per cent.