Leading economists have dismissed Treasurer Jim Chalmers’ pessimistic assessment of the global economy, and say it should not be used to justify inflation-boosting spending.
Already a subscriber?Leading economists have dismissed Treasurer Jim Chalmers’ downbeat assessment of the global economy, citing recent upgrades in growth and warning that it should not be used to justify inflation-boosting spending.
“There was an almost sole focus on inflation in the first couple of budgets, and in this budget, there will still be certainly, in the near term, a primary focus on inflation,” he said. Dr Chalmers would not be drawn on whether the budget would overall add to spending in the next two years when inflation is expected to be above the Reserve Bank of Australia’s target band – although that is probable based on flagged policies and spending.
“If you spend too much too soon, you risk there being no first rate cut in Australia until after the election,” Mr Richardson said. “They will really be worried about that; that is the single largest constraint on fiscal strategy. Last week, Dr Chalmers said the price of iron ore at about $US90 a tonne instead of $US130 a tonne would cost the budget about $9 billion in lost revenue, but that is $9 billion in lostThe iron ore spot price was trading around $US115 a tonne on Monday.
The federal budget will forecast growth of 4.75 per cent in China this year and 4.25 per cent next year.Dr Chalmers said this was a decrease of 0.25 of a percentage point in 2025 compared with the mid-year budget update delivered late last year. But the outlook is really a matter of perspective – the IMF’s global update was already forecasting GDP growth of 4.1 per cent in China in October last year, so the no-change position last week was viewed in a more positive light.
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