Australia’s Worsening Economy

Australia’s declining economy and soaring state borrowing has started to harm the popularity of Prime Minister Kevin Rudd’s centre-left government ahead of elections next year, a poll showed on Tuesday.

Support for Rudd’s Labor Party dropped 5% points to 42%, based on major votes, the News poll survey found in the Australian newspaper. The conservative coalition was only 4 points behind Labor at 38%.

The closely- watched poll is the foremost to show the government’s primary vote going backwards.

Rudd and Treasurer Wayne Swan have assured tax cuts in the May 12 budget to balance A$52 billion in stimulus spending, including pensioners and cash handouts for families, to help the economy weather the coming slump.

But there are signs voters are becoming more and more concerned with a deficit forecasters think could increase close to A$70 billion ($51.5 billion) in the next financial year with unemployment seen increasing to around 1 million people by mid-2010.

The government in February predicts redundancy would hit 7% by June next year with economic growth in next fiscal year of 0.75% and a deficit of A$35.5 billion.