The government is trying to win back voter support ahead of what is expected to be a difficult election in May.
Australia’s centre-right government on Tuesday pledged billions in fuel tax cuts, cash gifts and public works spending to win back voter support before May’s elections are expected to be difficult amid a rise in the cost of living.
Trailing behind the Labor opposition in opinion polls, Prime Minister Scott Morrison has focused his campaign on economic management, fiscal relief and national security as the war in Ukraine and tensions with China raise geopolitical concerns.
In his budget address on Tuesday, Treasurer Josh Frydenberg addressed Australia’s rapid financial improvement as the economy emerged from a pandemic-related downturn, but pledged support for families struggling with soaring consumer prices.
“We live in uncertain times. The last two years have been tough for our country, there have been setbacks,” said Frydenberg in a speech to politicians.
At the top of Frydenberg’s budget were a halving of the national fuel levy over the next six months, a one-time payment of A$250 ($187) to six million people on income support and additional tax breaks for 10 million low- and middle-income earners.
“With this budget, we are now offering Australians temporary, targeted and responsible living cost relief,” Frydenberg told reporters ahead of the budget’s release.
The government forecasts a budget deficit of A$79.8 billion ($60 billion) for the fiscal year ending June 2022, at the high end of analysts’ expectations but well below the A$99.2 billion projected at the budget update in June were forecast for December.
In the upcoming 2022/23 financial year, the deficit is expected to remain almost constant at A$78 billion before narrowing in subsequent years.
bump revenue
The fiscal improvement reflects both a strong labor market, tax hikes and welfare cuts, and record revenues as the war in Ukraine and ongoing global supply shortages push up the prices of some of Australia’s key exports, such as coal, wheat and iron ore.
Morrison’s Liberal-National government has been forced to unleash billions of dollars in stimulus in 2020 to prop up an economy turned upside down by the coronavirus pandemic, abandoning decades of his party’s fiscally conservative ideology as public finances plummeted into the red numbers plummeted.
Looking ahead, deficits are expected to continue but then narrow, reaching 1.6 percent of gross domestic product (GDP) by fiscal 2026, up from 3.5 percent in the current fiscal year.
Australia has gradually reopened its borders to international visitors, ending a two-year crippling travel ban that has starved the economy of tourists, foreign students and imported workers.
Net migration is expected to return to 41,000 arrivals in the current fiscal year, from 89,900 net departures last year. It is then forecast that arrivals will rise back to pre-pandemic levels of 180,000 and 213,000 in fiscal years 2022/23 and 2023/24 respectively.
That, coupled with a broader reopening of the global economy as the pandemic is contained, has prompted the government to raise its GDP and jobs expectations, with the unemployment rate likely to fall to a 50-year low of 3.75 percent by September .
Data released on Tuesday showed that retail sales rose a solid 1.8 percent in February, while bank card spending held up well in March.
These buoyant conditions are expected to add to price pressures as the government forecasts annual consumer inflation to reach 4.25 percent in the current fiscal year, well above the 2.75 percent announced in December before turning into the coming years will weaken.
Such inflation would add to the case for the central bank raising interest rates from record lows later this year, the first tightening since 2010.
Comments are closed.