Source : the age
Western governments risk losing the faith of working people if they fail to meet their aspirations, Treasurer Jim Chalmers will warn as he admits country’s economy and budget bottom line need to improve.
In a speech to the National Press Club on Wednesday, Chalmers will warn against assuming “extreme volatility” seen around the world is temporary as he makes a pitch for productivity reform against the backdrop of conflict in the Middle East roiling global markets.
Treasurer Jim Chalmers will warn the global economy faces perilous times.Credit: Alex Ellinghausen
“In important ways, we outperformed our peers,” Chalmers will say, noting inflation has fallen without unemployment spiking. “We should be proud of that, but not satisfied with that.”
The Australian economy has managed to avoid recession and maintained a labour market that is stronger than before the pandemic. However, the country’s economic growth has lagged some of its peers, grinding backwards in the 12 months to March when accounting for population growth.
Eight days after Prime Minister Anthony Albanese made his own Press Club appearance urging the need to restore faith in government, Chalmers will pinpoint the need to boost living standards for working people.
“So much of the democratic world is vulnerable because governments are not always meeting the aspirations of working people,” he will say.
“Our budget is stronger, but not yet sustainable enough,” Chalmers will argue. “Our economy is growing, but not productive enough. It’s resilient, but not resilient enough – in the face of all this global economic volatility.”
While trade uncertainty is higher than it was during the global financial crisis, Chalmers will note there are opportunities for Australia if the country could diversify its trade, make the economy more resilient and shore up supply chains.
“Since Liberation Day, Australian shares have outperformed US ones,” he will say. “These are normally signs that investors are becoming more wary of the US and more attracted to Australia’s stable markets.”
However, after delivering two surpluses, Chalmers’ latest budget revealed there will be a decade of deficits on the cards. And while weak productivity has plagued the country for at least the past decade, the Albanese government has failed to kickstart it in its first term.
Chalmers has said the focus in Labor’s second term would shift from managing inflation to boosting productivity. In August, the government will hold a productivity roundtable aimed at developing a new economic agenda including tax reform, deregulation and streamlined approvals of big projects.
The roundtable is likely to run for three days with 20 to 25 attendees including senior ministers and representatives of the Australian Council of Trade Unions and Business Council of Australia.
“[We have] an obligation to future generations to deliver a better standard of living than we enjoy today,” Chalmers will say in his speech. “But some of the pressures on our economy and budget are intensifying rather than easing.”
Analysis from KPMG shows younger Australians are in a tougher position than older generations, pulling back on recreational spending to cover costs such as mortgage repayments, rent and other essentials, while older Australians enjoy more travel and dining out.
While the average millennial’s annual mortgage repayments have fallen from $37,270 in 2013-14 to $33,680 in 2023-24, KPMG urban economist Terry Rawnsley said saving for a deposit and servicing a home loan had become increasingly challenging.
“The fall in the average value of mortgage payments is not actually because mortgages are getting cheaper, but the result of the lower homeownership rates because younger people simply cannot afford to buy their own home any more,” he said.
Meanwhile, Harry Murphy Cruise, Oxford Economics head of economic research and global trade, said Australia’s growth had stalled, and the outlook had dimmed. “The economy crawled in early 2025 … and there’s little evidence it will get out of its funk quickly,” he said. “We now expect GDP growth of just 1.5 per cent in 2025, down from our 1.8 per cent forecast in May.”
Chalmers will warn the global economy, which is growing at close to its weakest rate in nearly decades, faces “perilous times” amid the increase in volatility worldwide.
“Global oil prices had slumped almost 20 per cent since their mid-January peak until last week, when they spiked more than 10 per cent when the Middle East flared again,” he will say.
Israeli strikes on Iranian energy infrastructure have heightened fears that the conflict will severely disrupt Iran’s oil production or lead it to close the Strait of Hormuz – a vital shipping route – driving up petrol prices in Australia and threatening a spike in inflation.
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