The Australian government has announced a $10 billion package over four years to ease the financial burden of its citizens due to rising living costs.
The relief plan, announced as part of the country annual budget, aims to provide financial assistance to families and businesses without stoking inflation, which is still at a near 30-year high of 7 percent despite a slight decline in the first quarter.
The financial assistance will benefit over 5 million low-income families, small businesses, and pensioners struggling with high power bills. This aid is particularly crucial as Australia’s energy prices have been increasing, leading to a surge in power bills.
The government has been careful with its spending to prevent inflationary pressures, unlike the Reserve Bank of Australia (RBA), which surprised traders by raising rates by 0.25 percent to 3.85 percent last week.
The RBA has warned that inflation risks are on the rise due to low productivity growth, increasing energy prices, and surging rents. The government’s latest relief measures come after it set aside $8 billion for wage rises for aged care workers over four years.
Inflation remains a concern for policymakers, and the the central bank’s decision to raise rates has been met with mixed reactions from traders.
While some have called the rate hike premature, given that inflation has not yet shown signs of being sustained at the current level. Others, however, called the move necessary, arguing that it will prevent inflation expectations from becoming entrenched, leading to a more prolonged inflationary period.
The financial package and the surprise rate hike come at a time when the Australian economy faces the threat of recession, which is partly blamed on the central bank’s aggressive rate hikes.
While interest rate hikes have been used across the world to cool inflation down, they also deaccelerate economic growth. With the surprise rate cut in May, there is a 45 percent probability of Australia slipping into a recession this year, say media reports.
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