Australian government commits $10 billion in budget to lower cost of living

The central government said the plan was designed to directly ease pressures on prices and inflation, which, despite a decline in the first quarter, was close to a 30-year low of 7.0%.

“The centerpiece of the budget … will be cost-of-living relief that does not worsen inflation,” Treasurer Jim Chalmers said in a statement ahead of Tuesday’s federal budget.

“People are under the pump. We have carefully calibrated this budget and designed it to reduce pressure on the cost of living rather than make it worse.”

In the budget, the government is expected to release financial assistance to more than 5 million low-income families, small businesses and pensioners struggling with high electricity bills.

After the Reserve Bank of Australia (RBA) stunned markets by raising rates last week, beating traders’ expectations, Mr Chalmers has repeatedly said it will remain modest in spending to avoid adding to inflationary pressures. They planned for an extended break.

On Friday, the RBA warned of rising inflation risks due to weak productivity growth, rising energy prices and rising rents.

The latest relief measures come after the government earmarked A$11.3 billion over four years for rising pensions, announced an additional 5% tobacco tax and $2.4 billion in additional taxes on oil and gas producers.

The budget is expected to show a sharp narrowing of Australia’s deficit as tax revenues from commodity exports fill Australia’s deficit, but the outlook will be downgraded as fiscal challenges loom.

($1 = 1.4830 Australian dollars)