Budget 2022-23: feeling the pinch

The cost of living is a key area of focus in the 2022-23 Australian Federal Budget.

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This comes as no surprise given inflation has intensified considerably this year and has been a central concern for households. Real wages are falling, consumer confidence is declining and Google searches for petrol prices and inflation have exploded in recent weeks.

"The temporary fuel excise relief of A22c per litre for six months will drop petrol prices a little lower than it would otherwise be."

ANZ Research is forecasting slightly higher rates of inflation than what the Federal Government has forecast over the next few months in the budget. But by fiscal 2023, ANZ Research’s inflation forecasts are lower than the budget predictions.

The key measures for cost of living in the 2022-23 Budget include a one-off $A250 payment to all concession card holders and welfare recipients - about $A1.5 billion that will quickly be spent in the economy.

There's also a one-off $A420 tax break for low to middle income earners which will encourage a little bit more spending too. The temporary fuel excise relief of A22c per litre for six months will drop petrol prices a little lower than it would otherwise be.

Housing affordability measures will also spur spending, with increased availability for first-home buyers to get into the market with a 5 per cent deposit. First-home buyers will also be able to put more money into their super and use that money for housing deposits as well.

ANZ Research is more optimistic about wages than budget forecasts which estimate wages will reach 3.25 per cent by next financial year.

Wage growth is forecast to be closer to 3.8 per cent in the same period. Similarly, the government has forecast unemployment to be higher - at 3.75 per cent - than ANZ Research’s 3.3 per cent.

Adelaide Timbrell is Senior Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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