Jim Chalmers says next month’s budget will be underpinned by “five pressures” on Australia’s economy.
In a discussion with other G20 finance ministers in Washington overnight, the Treasurer laid bare the fine line Australia had to walk as it sought to grow, while the economy slowed.
He said five global pressures – lingering inflation, slowing growth, rising tensions, fragmenting supply chains, and a transforming global economy – would “weigh heavily” on next month’s budget.
“The increasingly complex and concerning set of conditions we face in the global economy presents a profound challenge for policymakers,” he said.
In a message to his counterparts, he said all major economies could benefit from “pursuing realignment” through providing cost of living relief to people in a way that takes pressure off inflation; repairing the budget and supply chains; and reforming the global economy through a focus on enabling investment.
“In Australia … we’ve got a lot of things going for us. A trifecta of moderating inflation, stronger jobs growth, and the return of real wages growth ahead of schedule,” he said.
“But we have also been buffeted by global challenges and higher interest rates.
“Our economy is slowing, and this will have material implications for our revenue outlook and our budget.”
Mr Chalmers said amid the global pressures Australia still “faced the challenge of creating the new economy of net zero”.
Prime Minister Anthony Albanese this month announced the Future Made in Australia Act, set to be a centrepiece of the budget, that will invest tens of billions of dollars into critical manufacturing to help the clean energy transition.
In Washington, Mr Chalmers said Australia’s fiscal strategy was evolving in the face of both challenges and opportunities.
“We can’t afford to fall behind, or fail to make the investments that will work to secure our future,” he said.
“Our economic strategy will be focused on the fight against inflation but our budget will see a stronger emphasis on economic growth, to help us meet the challenge of the defining decade ahead.”
Shadow treasurer Angus Taylor on Friday said there was “no reason to endorse” the government’s economic strategy.
“Yeah, the budget situation at the moment is an endorsement of years of approving projects in the resources sector that is giving a great windfall to Australia,” he said.
“This is a government now that’s slowed those approvals down to the point where they’re sclerotic.
“At the same time, what we’re seeing with this government is they’re stealing from the household budget, to bolster the government budget, so they can spend more money on their latest pet projects, which we’re seeing this government doing and with their MIA Bill … (and) it’s very clear that they are being criticised widely for the approach they’re taking.”