Australian Prime Minister Scott Morrison meets with U.S. Secretary of State Antony Blinken, Japanese Foreign Minister Yoshimasa Hayashi, Australian Foreign Minister Marise Payne and Indian Foreign Minister Subrahmanyam Jaishankar at the Quad meeting of f
Australian Prime Minister Scott Morrison meets with U.S. Secretary of State Antony Blinken, Japanese Foreign Minister Yoshimasa Hayashi, Australian Foreign Minister Marise Payne and Indian Foreign Minister Subrahmanyam Jaishankar at the Quad meeting of foreign ministers in Melbourne, Australia, February 11, 2022. Reuters / KEVIN LAMARQUE

Australia's government is hoping to use budget goodies to offset cost of living pressures for disgruntled voters ahead of an election expected in May, but the consumer mood may already be too dark for the ploy to gain much traction.

Treasurer Josh Frydenberg has flagged one-off cash payments for pensioners and a temporary cut in fuel taxes among other measures are likely in his 2022/23 Budget later on Tuesday, along with the usual pre-election splurge in infrastructure.

Forecasts for economic growth are expected to be revised up, with unemployment seen hitting 60-year lows of 3.75% later this year. The budget will also tip an acceleration in annual wage growth to a decade-high, though such projections are notoriously unreliable having overshot reality for years.

The Liberal National coalition of Prime Minister Scott Morrison is hoping all this good cheer will revive its standing in opinion polls, where it is running a distant second to the opposition Labor Party.

The bar is a high one, however, as ANZ Bank's latest survey of consumers showed sentiment on personal finances was the bleakest since the depths of the pandemic in May 2020.

"Consumer confidence is very weak given the strength of employment, which we think is directly linked to concerns over cost-of-living pressures," said ANZ's head of Australian economics David Plank.

"It will be interesting to see whether the measures expected in the Federal Budget provide a boost to confidence."

Keeping consumers happy is vital for the economy given they have been the engine of recovery. Data out on Tuesday showed retail sales jumped a solid 1.8% in February, while spending on bank cards has held up well in March.

An added complication is that rising inflation has the Reserve Bank of Australia (RBA) contemplating a hike in record-low interest rates later this year, the first since 2010.

Analysts warned Frydenberg would have to be careful not to provide too much near-term stimulus since that would only pile on pressure for an earlier move by the RBA.

A lift in borrowing costs would certainly not be welcomed by Australian households whom, in aggregate, hold record amounts of mortgage debt.