Brazil spending bill boosts Bolsonaro

Brazil's congress has approved a major spending package President Jair Bolsonaro is banking on to lift his flagging re-election hopes, despite expectations it will fan double-digit inflation and hurt the country's exchange rate

Brazil's lower house approved the measure, which amends the constitution to bypass the country's spending cap and boost social benefits.

It must now be formally enacted by both houses in a joint session of congress.

The package includes a 1000 reais ($A273) payout for self-employed truckers, benefits for taxi drivers, and 50 per cent increases in social welfare payments.

The bill has caused alarm among investors, who say it shows a lack of fiscal discipline by the government.

The government argues it needs to act urgently to help Brazilians hurt by high inflation.

But the new legislation is likely to further fan inflation, already around 12 per cent, and may result in fresh monetary tightening, analysts told Reuters.

The US dollar has gained 13.95 per cent against the real since the beginning of June.

Bolsonaro trails leftist former President Luiz Inacio Lula da Silva in opinion polls ahead of the October vote.

The popularity of the incumbent far-right former army captain has been hurt by the high inflation, a weak economy, and his handling of the COVID-19 pandemic.