Australian government pledges $10 billion in budget to ease cost of living

Anil Panchal FXStreet

Australia's centre-left Labor government said on Monday it would include A$14.6 billion ($9.84 billion) over four years in the federal budget for cost of living relief for families and businesses, which it promised would not stoke inflation.

The news also highlights the Reserve Bank of Australia’s (RBA) Friday’s warning that risks to inflation were on the upside given low productivity growth, rising energy prices and a surge in rents.

While conveying the hints for the Tuesday's federal budget, Treasurer Jim Chalmers said, “The centrepiece of the budget ... will be cost-of-living relief that doesn't add to inflation."

The policymaker also adds that people are under the pump. We've carefully calibrated and designed this Budget so that it takes pressure off the cost-of-living rather than add to it.

Additional details

Chalmers has repeatedly stated his budget would be restrained on spending so as not to add to inflationary pressures, while also giving some relief, after the Reserve Bank of Australia (RBA) last week stunned markets with a rate rise, defying trader expectations for an extended pause.

The latest relief measures come after the government set aside A$11.3 billion for wage rises for aged care workers over four years, while announcing an additional 5% tobacco tax and A$2.4 billion in more tax on oil and gas producers.

Australia's deficit is expected to shrink sharply, the budget is expected to show, as its coffers bulge with tax windfalls from commodity exports, yet the outlook will be a sober one as fiscal challenges loom.

Also read: AUD/USD aims to surpass 0.6750 as Fed to pause hiking rates despite solid US labor market

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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