Treasurer Jim Chalmers tells parliament that nation is facing a ‘once-in-a-generation’ challenge and real wages won’t grow until 2023-24 fiscal year
Chalmers’ speech is his first major one since taking on the role after Labor’s May election win. It helps set out the government’s priorities before a planned jobs summit at the start of September and a formal budget in October.
Instead of subsiding to 3% by next June, Treasury now expects it to still be running at an annual pace of 5.5% before sinking to half that, or 2.75% by June 2024. The challenges Australia faces include slowing global growth, particularly in the US – where the Federal Reserve again raised rates overnight – and China. The Treasury trimmed its estimate of global expansion by half a percentage point to 3.25% for 2022 and 2023.
While higher costs for borrowers will put the financial squeeze on the roughly one-third of households with mortgages, they will also start putting a strain on the federal budget. “The temporary improvement in tax receipts may not persist over time, the impact on payments will persist and the cost of interest on debt will grow as more debt is refinanced at higher yields,” Chalmers said.
Other drags on the economy will be slower-than-forecast exports, as the effects of floods and other impacts slow some shipments abroad.
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