The Treasurer’s Focus on Economic Security in an Evolving World
In the face of growing concerns about the global economy, Treasurer Jim Chalmers has assured the public that the upcoming federal budget will prioritize economic security. Chalmers acknowledges that current economic conditions are a “tricky balance of risks,” with inflation being a particular issue. The budget will place a real emphasis on responsibility and economic security to address these challenges.
One of the major concerns for the global economy is the strain on supply chains and the fragmentation and transformation of the global economy. These factors have contributed to a sense of uncertainty and instability in the financial markets. However, the April World Economic Outlook offers some optimism, predicting a rise in global growth for 2024. While the forecasted growth rate of 3.2 percent may be low compared to historical standards, it represents an upward revision of 0.3 percentage points since October 2023.
Pierre-Olivier Gourinchas, the chief economist of the International Monetary Fund (IMF), suggests that global growth remains steady and inflation is slowing. However, he also cautions that progress towards inflation targets has stalled and there are concerns about high services inflation, potential trade restrictions on Chinese exports, and rising oil prices. Gourinchas emphasizes the need to bring inflation back to target as a priority.
There are several risks that could further impact the global economy. The possibility of conflicts in Gaza spreading to the wider region, attacks in the Red Sea, and the ongoing war in Ukraine all pose threats to commodity prices. Additionally, China’s weakened property sector could lead to ongoing economic weakness, which would have repercussions for trading partners like Australia. The IMF predicts that China’s economy will slow from 5.2 percent in 2023 to 4.1 percent in 2025.
Despite these risks, the IMF views the global outlook as “broadly balanced,” with potential for inflation to fall faster than expected if participation in the jobs market continues to grow. This could allow central banks to start cutting interest rates sooner, providing some relief to the global economy.
In terms of Australia, the economic predictions remain relatively stable compared to the previous update. The IMF forecasts a 1.5 percent rise in GDP for 2024 and 2 percent for 2025. Inflation is expected to be at 3.5 percent in 2024, reaching the top of the Reserve Bank of Australia’s target range, and then settling back to 3 percent by 2025.
Treasurer Chalmers acknowledges that inflation in Australia has eased significantly and while it may not continue to decrease in a straight line, it is a fraction of what it was a few years ago. He also recognizes the risks posed by China’s property sector and the potential escalation of conflicts in the Middle East and Europe. Chalmers emphasizes the need to take these global developments into account.
In light of these concerns, Treasurer Jim Chalmers will be attending important meetings with the International Monetary Fund, World Bank, and G20 finance ministers in Washington. This demonstrates Australia’s commitment to staying informed and actively participating in global economic discussions.
As the global economy continues to evolve, it is crucial for governments to prioritize economic security. Treasurer Chalmers’ focus on responsibility and economic security in the upcoming federal budget sends a strong message that Australia is prepared to address these challenges head-on. By acknowledging the risks and actively engaging in international discussions, Australia is positioning itself to navigate an uncertain global landscape and ensure the stability of its own economy.
