Australian Treasurer Jim Chalmers warned Friday that the nation's economic growth will likely fall short of the 1.75% forecast in the May budget. Speaking ahead of the mid-year review in December, Chalmers attributed the slowdown to the impact of a series of rate hikes and rising inflation. "Higher interest rates and higher inflation are likely to mean softer growth and slightly higher unemployment," he stated. Despite the moderation, Australia remains ahead of most major developed economies, supported by strong business and foreign investment.
The comments precede the Reserve Bank of Australia's upcoming decision on whether to raise rates for a fifth time this year. So far in 2024, the central bank has increased the cash rate by 1 percentage point to 4.6%, pursuing one of the most aggressive tightening cycles among advanced economies. Chalmers emphasized that both the government and the RBA expect inflation to return to the 2%-3% target band within 12 months, even as price pressures accelerate.
The remarks come against a backdrop of global economic uncertainty, including the recent US-Israeli attack on Iran triggering an oil shock. Despite the challenges, Chalmers maintained an optimistic outlook for the medium-term trajectory of the Australian economy.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing