CANBERRA, May 5 (Reuters) - Australia's worsening economy and soaring state borrowing has begun to hurt 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 fell 5 percentage points to 42 percent, based on primary votes, the Newspoll survey in the Australian newspaper found. The conservative coalition was just 4 points behind Labor at 38 percent.
The closely-watched poll is the first to show the government's primary vote going backwards.
"Right now the pressure is on the government. It's a process of people of people beginning to have doubt," said Newspoll chief Martin O'Shannessy.
Rudd and Treasurer Wayne Swan have promised tax cuts in the May 12 budget to complement A$52 billion in stimulus spending, including cash handouts for families and pensioners, to help the economy weather the coming downturn.
But there are signs voters are becoming increasingly concerned with a deficit analysts think could rise close to A$70 billion ($51.5 billion) in the next fiscal year with joblessness seen growing to around one million people by mid-2010.
The Newspoll survey found 47 percent of voters believed Rudd should reduce the size of the budget deficit by scrapping tax cuts due to come into effect on July 1, which Labor promised during the last election in 2007.
A massive 78 percent of respondents said a third-round stimulus package expected in the budget should steer away from Rudd's strategy of one-off payments to individuals and instead be spent on infrastructure such as new roads or schools.
Support for Rudd's government remained at 55 percent when votes were distributed to the two main party groups, down 3 points, but 10 points clear of the major opposition coalition and pointing to a second-term victory for Labor.
But Labor's 42 percent support in the primary vote is below its 2007 election result of 43.3 percent as voters begin to question Rudd's handling of the economy in a country where voters often punish governments who rack up deficits.
Rudd continued to be preferred as prime minister by 64 percent of the 1,201 voters polled, maintaining a big lead over opposition leader Malcolm Turnbull who was unchanged at 19 percent support.
Treasurer Swan has warned the coming budget will contain forecasts substantially worse than February mini-budget forecasts for growth and revenue.
The government in February forecast unemployment would hit 7 percent by June next year, with economic growth next financial year of 0.75 percent and a deficit of A$35.5 billion. ($1=1.359 Australian Dollars) (Reporting by Rob Taylor; Editing by James Thornhill)