‘Not immune’: Treasurer warns of higher inflation and unemployment to come

• Treasurer Jim Chalmers has warned that Australia will not be shielded from rising interest rates and inflation hitting economies worldwide.
• In a speech to economists, Chalmers said Treasury now expects slower growth and higher unemployment.
• Despite this, he expects inflation to return to the RBA’s target range of between 2 and 3 per cent “within the next 12 months.”

Treasurer Jim Chalmers has warned that Australia is “not immune” to the economic factors hitting the rest of the world, saying he expects the economy to slow and unemployment to deepen.

Speaking at the Citi A50 Australian Economic Forum in Sydney, Chalmers said that while Australia was better off than many developed economies, he knew many Aussies were struggling to make ends meet.

“Higher inflation is putting people under pressure, tighter monetary policy is weighing on domestic activity, and we can see that in the softening of the labour market,” he said.

“We’re not immune from the consequences of two wars, both impacting almost every economy in one way or another, posing risks to global growth, pushing up global inflation, and pushing up borrowing costs.”

The Treasurer said both his department and the RBA expect inflation to return to its target of between 2 and 3 per cent over the next 12 months, but getting there may be painful.

“Treasury is in the process of revising all the numbers for the mid‑year update,” he said. “Higher interest rates and higher inflation are likely to mean softer growth and slightly higher unemployment.”

Chalmers spoke at length about inflation, noting that many of the country’s economic pundits will be watching the upcoming CPI data being released this Wednesday.

“Markets [are] not expecting inflation to go down,” he said.

“The IMF World Economic Outlook reports global inflation tracking up this year.

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“That means markets now expect multiple interest rate rises in every major advanced economy over the next 12 months.

“This is being compounded, and options are being constrained by higher global debt.”

Despite the gloomy forecast for households, Chalmers said he believes the outlook is still bright for the nation as a whole.

“So we have a lot coming at us from around the world, but we have a lot going for us as well. Our challenges are considerable, but our advantages are remarkable,” he said.

“Our economy is growing faster than almost every G7 economy, and the IMF expects this to continue for at least 5 more years.

“Our debt is lower than every G7 country and will peak lower too.

“So even with higher bond yields, our interest repayments will be a fraction of what we’ll see elsewhere.”

He also hinted that Australia will be at the forefront of the world’s AI boom as an attractive investment opportunity for global partners.

“Australia is benefiting from the boom in data centres and AI infrastructure. But we are not confining ourselves to just one link in the AI supply chain,” he said.

“We will soon introduce our world‑leading AI standards to the parliament.

“These standards will provide policy certainty and give businesses the confidence they need to invest in Australia’s AI future, in ways that work for communities.”