Rising unemployment, stubbornly high inflation and a looming interest rate hike are piling misery onto Australian consumers, but Labor insists better days are on the horizon.
The pinch of optimism comes as mortgage holders brace for the Reserve Bank of Australia to lift the official interest rate to a near-15-year high of 4.6 per cent on Tuesday, an outcome money markets are treating as largely a foregone conclusion.
Deputy Prime Minister Richard Marles said the government knew households were "doing it tough" and was working to put downward pressure on inflation.
"We just need to keep working at this to see this through and there will be light at the end of the tunnel," he told News24 on Sunday.
Inflation, which came in hotter than expected in August, could rise from 3.5 to four per cent when the Australian Bureau of Statistics publishes its latest figures on Wednesday.
High fuel prices, driven by conflict in the Middle East, have lit a fire under rising living costs.
Mr Marles was quick to point Australians to overseas circumstances as the driver of their economic woes.
"We're facing an internationally inflationary environment, essentially stemming out of the conflict," he said.
"We've got a budget, an economy with less debt than almost any country in the world that places us in a good position to manage this."
Central bankers in the US, Japan and Europe have all pushed interest rates up since the RBA's board met in August, all crediting their decisions to sky-rocketing oil and fuel prices resulting from the increasingly intractable US-Iran war.
Average fuel prices in Australia's five largest cities had risen to $2.37 per litre for petrol and $2.69 for diesel as of Wednesday, but Labor has rejected calls for it to reinstate a previous cut to fuel taxes to help ease the burden on road-users.
But opposition frontbencher James Paterson said runaway spending was influencing the Reserve Bank more than overseas conflict.
"The government is spending at stimulus levels and that is driving up inflation and forcing the RBA's hand," the Liberal senator said.
"I think that will be devastating for Australian people, I don't think they share the rosy view of the economy's performance over the last four years ... debt is up, taxes are up, real wages are down, the cost of everything is up, even unemployment is up."
Australia's jobless rate jumped to its highest level in almost five years, the ABS reported on Thursday, but it did little to put fears of an interest rate hike to bed.
Three consecutive rate hikes and the May budget's removal of tax concessions for property investors have also helped to drive down housing sentiment and prices.
Auction clearance rates, considered a key leading indicator for prices, slumped to a 10-week low of 50.3 per cent across capital cities, according to housing data firm Cotality.
A weak clearance rate, of below 60 per cent, generally points to further price falls.
