The federal budget will predict the unemployment rate dropping to levels not seen since the early 1970s and a pick up in wages growth to its strongest in a decade.
Treasurer Josh Frydenberg will hand down his fourth budget on Tuesday predicting the unemployment rate falling to 3.75 per cent later this year, the lowest level since August 1974.
That compares with a 4.25 per cent forecast for 2022/23 at the time of the mid-year review released in December.
The unemployment rate currently sits at four per cent, a 14-year low.
Mr Frydenberg insists the economic recovery from the pandemic that has been faster and stronger than any of the advanced economies of the G7 hasn’t been “luck”.
“It has been the result of a clear fiscal strategy to save jobs and drive the unemployment rate to historically low levels,” he said.
“With more people in work and less people on welfare, the budget bottom line is improving after providing unprecedented economic support to Australians.”
Economists are expecting an underlying budget deficit of between $80 billion and $70 billion for the 2021/22 financial year compared with the $99.2 billion shortfall predicted in the mid-year review and the $106.6 billion at the time of last year’s May budget.
The budget will include tens of billions of spending commitments covering infrastructure, health, skills and national security.
The government has also promised a support package for households who are facing cost of living pressures, particularly from a spike in petrol prices to above $2 a litre.
There is speculation it will include a temporary cut in the 44.2 cents per litre fuel excise.
Still, there was already some promising signs for motorists with a stabilisation in petrol prices in the past week after touching record highs the previous week.
The Australian Institute for Petroleum said the national petrol price average fell 5.8 cents last week to 206.7 cents per litre.
Rising cost of living pressures and unsettled consumer confidence may be taking the gloss off retail spending after being a key plank in Australia’s economic recovery from the Delta COVID-19 variant late last year.
Hours before the budget is released, the Australian Bureau of Statistics will release retail trade figures for February, with the consensus among economists pointing to a 0.9 per cent increase after the 1.8 per cent rise in January.
Confidence has declined further in recent weeks due to the floods along the Australian east coast and escalating concerns over inflation.
The weekly ANZ-Roy Morgan consumer survey is also released on Tuesday.
Last week confidence fell to its lowest level since September 2020, while consumer inflation expectations jumped to an 11-year high of six per cent.
Annual inflation was running at 3.5 per cent as of December.