Australian govt pledges $10 billion in budget to ease cost of living

The plan is designed to directly ease price pressures and inflation, the federal government said, which has eased in the first quarter but still sits near 30-year highs of 7.0%.

"The centrepiece of the budget ... will be cost-of-living relief that doesn't add to inflation," Treasurer Jim Chalmers said in a statement, ahead of Tuesday's federal budget.

"People are under the pump. We've carefully calibrated and designed this Budget so that it takes pressure off the cost-of-living rather than add to it."

The government is set to unveil in the budget financial assistance for more than 5 million low-income families, small businesses and pensioners struggling with high power bills.

Chalmers has repeatedly stated his budget would be restrained on spending so as not to add to inflationary pressures, while also giving some relief, after the Reserve Bank of Australia (RBA) last week stunned markets with a rate rise, defying trader expectations for an extended pause.

The RBA on Friday warned that risks to inflation were on the upside given low productivity growth, rising energy prices and a surge in rents.

The latest relief measures come after the government set aside A$11.3 billion for wage rises for aged care workers over four years, while announcing an additional 5% tobacco tax and A$2.4 billion in more tax on oil and gas producers.

Australia's deficit is expected to shrink sharply, the budget is expected to show, as its coffers bulge with tax windfalls from commodity exports, yet the outlook will be a sober one as fiscal challenges loom.