CANBERRA (BLOOMBERG) - With an election just weeks away and the government trailing badly in opinion polls, Australia's Prime Minister Scott Morrison is mounting a last-ditch effort to woo back disaffected voters with a spending spree.
His Liberal-National coalition has already earmarked about A$9 billion (S$8.7 billion) for expected pre-election giveaways in Tuesday's (April 2) budget. The treasure chest may be even deeper, as stronger than expected commodity prices and rising employment boost tax receipts.
Yet while Morrison is tipped to deliver the nation's first surplus in more than a decade and the coalition government has overseen a hiring bonanza during its second term in office, it's unlikely to win a third.
Party infighting has seen it churn through three prime ministers in six years, with accompanying policy paralysis.
With the opposition Labor party favorite to win next month's ballot, the fiscal blueprint may become a ghost budget that's never passed by parliament.
National Australia Bank Ltd. doubts markets will even respond to Treasurer Josh Frydenberg's address on Tuesday evening because of "ingrained scepticism" that the coalition will be in a position to deliver on it.
"It's going to be very hard for the government to turn around its poor performance and win the election from here, regardless of what they hand out in the budget," said Jill Sheppard, a political analyst at the Australian National University.
"The coalition's reputation as being sound economic managers is the only strong calling card it has left with a lot of voters, but there's a risk they could even blow that with too many blatant giveaways."
Morrison is likely to argue that slowing growth and constraints on taxpayers' purse strings means stimulus is justified. And unlike in previous years, when the budget was seemingly entrenched in deficit in the wake of the global financial crisis, the bottom line is working in his favour.
Frydenberg will be able to boast that the government is on track for a A$4.6 billion surplus for the fiscal year through June 2020, according to the median forecast in a Bloomberg survey of 13 economists.
A windfall from commodities and hiring also boosted last year's budget, which delivered income tax cuts of about A$144 billion over a decade. The mid-year update in December contained an allowance of A$9.2 billion of yet-to-be announced revenue decisions over three years, which Commonwealth Bank of Australia analysts say is likely reserved for more tax cuts.
The government is also expected to announce a raft of transport infrastructure projects that may help it shore up support in marginal seats. While it's mainly been relatively tight-lipped on expected spending measures and where tax cuts will be aimed, on Sunday it announced more than 3.9 million Australians will receive a one-time payment of A$75 for singles and A$125 for eligible couples to help pay their energy bills.
Australians struggling under one of the developed world's highest household debt burdens are likely to welcome tax cuts, as will the central bank, which is under increasing pressure to resume interest-rate cuts to reverse slowing growth. The worst property slump in a generation is the latest threat to consumers' enthusiasm.
While the government lauds a jobs boom that's driven unemployment to an eight-year low of 4.9 per cent, stagnant wage growth means many people don't feel any benefit to their hip pockets.
Labor is vowing to boost spending for schools, hospitals and renewable energy, as well as ending and redistributing billions in tax perks seen to favor the wealthy. It's likely to match any government-announced cash handouts and increased income-tax cuts for low-and-middle-income earners, the Australian Financial Review reported Monday, citing an unnamed Labor source.
Beefing up its energy policy agenda, the opposition announced on Monday it plans to curb emissions by the nation's 250 biggest industrial polluters. Labor also said at the weekend it will unveil its budget before the end of the year if it wins power.
Crucially, Labor has presented a disciplined front for years, in contrast to the government's debilitating internal conflicts. An expectation that Labor will win means the business community, and voters, may well pay more attention to opposition leader Bill Shorten's budget reply speech on Thursday than Frydenberg's address on Tuesday.
Morrison, 50, hasn't been able to turn around the centre-right government's fortunes since taking the reins in August following a party-room coup that saw moderate predecessor Malcolm Turnbull ousted by disgruntled right wingers.
While a change of government next month is not certain, Morrison knows he faces a mammoth task in winning over voters. A Newspoll three weeks ago became the 50th consecutive such survey to show the government trailing its main opposition. Should the eight-point margin be replicated in the May election, Labor will comfortably win.