Wayne Cole

SYDNEY, (Reuters) – Australia’s government wants to make budget cuts to alleviate the cost of living for unhappy voters in advance of the May election. However, the mood of the consumers may be already too negative for this tactic to work.

Josh Frydenberg, Treasurer of the Treasury has indicated that one-off cash payments to pensioners as well as a temporary reduction in fuel taxes are possible in his 2022/23 budget later Tuesday. This is in addition to the pre-election infrastructure splurge.

Expectations for economic growth will be revised up with unemployment expected to reach a 60-year low of 3.75 percent later in the year. The budget will see an acceleration of annual wage growth reaching a 10-year high, although such projections have proven to be highly unreliable and often overestimate reality for many years.

Scott Morrison, Prime Minister of the Liberal National coalition, hopes that all this cheerleading will boost its standing in opinion surveys. It is currently running second behind Labor Party.

However, the bar has been set high by ANZ Bank’s recent survey of customers, which revealed that sentiments on personal finance were the most negative since May 2020, when the pandemic reached its worst.

David Plank, ANZ’s Australian economists chief, stated that “Consumer confidence has been very low given the strength and employment.”

“It will interesting to see if the Federal Budget measures provide confidence boosting.”

It is crucial that consumers are happy in order to maintain economic recovery. On Tuesday, data showed that retail sales rose by 1.8% in February while bank card spending held steady in March.

A further problem is the fact that the Reserve Bank of Australia has been influenced by rising inflation to consider raising interest rates at record lows later in the year. This would be the first time since 2010.

Analysts cautioned Frydenberg that he would need to avoid providing too much stimulus in the near term as it would only increase pressure to make an RBA move sooner.

Australian homeowners, who collectively have record levels of mortgage debt, would not welcome an increase in borrowing costs.