Australian Treasurer Jim Chalmers promised the government would deliver a “responsible” budget to avoid stoking further inflationary pressures in the economy.
(Bloomberg) — Australian Treasurer Jim Chalmers promised the government would deliver a “responsible” budget to avoid stoking further inflationary pressures in the economy.
In an interview with Bloomberg Television, Chalmers said the government intends to follow the same cautious approach it took at its first fiscal set piece in October. Back then, it opted to put back most of its commodities windfall into the budget rather than use it to fund spending programs.
“We will have a similar objective,” Chalmers said Saturday, speaking at the Group of 20 finance ministers meeting in Bengaluru, India. “One of the defining features of the first one — and will be of the second one — is restraint, spending restraint.”
Like many other nations, Australia is grappling with the challenge of how to offer relief to a heavily indebted electorate facing rising costs without entrenching high inflation.
Surging commodity prices mean the government will see a notable improvement in the fiscal forecasts, potentially allowing room for spending in the May budget. Australia recorded a fifth straight year of trade surpluses in 2022 and China’s reopening means the outlook is likely to improve further.
While the government will factor that promoting growth will be a future challenge, Chalmers said right now inflation is his key concern.
“It is still the defining challenge in the global economy,” Chalmers said. “It’s still the defining challenge in the Australian economy.”
On the economic outlook, Chalmers said while the economy is set to slow “considerably,” he still expects the country will avoid a recession. The Reserve Bank of Australia has raised rates by 3.25 percentage points since May and warned further rate hikes will likely be needed.
China Outlook
In a further sign of the thaw in relations with China, Chalmers suggested Australia hasn’t closed the door on future investment from Beijing in its lithium supply chain.
In November, Chalmers ordered a review of foreign investment in key commodities tied to electric vehicles and clean energy, and pledged to be “more assertive” about encouraging investment that aligned with the country’s long term interests. While he didn’t mention China specifically, its dominance of the market had earlier been flagged by the resources minister as creating vulnerabilities.
Since then, relations between Australia and China have improved and earlier this month the first shipment of coal in more than two years docked in China. Back in 2020, after then-Prime Minister Scott Morrison called for an international investigation into the origins of Covid-19, Beijing placed restrictions on lucrative Australian exports like coal, wine and lobsters.
“We want to collaborate with partners right around the world,” Chalmers said when asked specifically about Chinese investment in critical minerals. He reiterated though the government wanted to “work out the optimal mix of domestic and foreign investment.”
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