Increasingly gloomy forecasts for the global economy will lead to last-minute downgrades to Australia’s economic figures in next week’s Federal Budget, Treasurer Jim Chalmers warning of “a path increasingly perilous” for global markets and major trading partners.
The budget predicts the UK economy will contract by 0.25% in 2023 and the US will see anemic growth of 1%, with the government warning that Australia will not escape a global slowdown.
“The budget will confirm the sharp deterioration in growth prospects globally and in several major economies, with some at risk of falling into recession,” Chalmers said.
The treasurer traveled to Washington last week for meetings with G20 finance ministers and the International Monetary Fund. He said the trip, coming less than a fortnight before his first budget, would help him better understand impending economic trends.
Upon his return, Chalmers said his budget would revise down economic growth expectations for major trading partners China, the United States, the United Kingdom, India and Japan.
“The global economy is on an increasingly perilous path and the downside risks are significant – that was a clear message from meetings with my counterparts in Washington DC,” he said.
“The budget will confirm the sharp deterioration in growth prospects globally and in several major economies, with some at risk of falling into recession.”
In March, the Federal Treasury predicted that the Chinese economy would grow by 4.75% in 2022, 5.25% in 2023 and 5% in 2024. The latest figures, which will be taken into account in the budget, evaluate these figures annual growth at 3%, 4.5%. and 4.5% respectively.
The United States was expected to grow at 3.5% in 2022, 2.5% in 2023 and 2% in 2024. It was also revised down to 1.75%, 1% and 1.75%. The UK’s projection for 2023 will be sharply lowered from 2% growth to a contraction of 0.25%. Eurozone growth will be revised down from 2.25% to 0.5% in 2023.
Chalmers said the national economy was sheltered from some of the pressures contributing to the sharp decline in global growth, but next week’s budget is expected to see downward revisions to national growth forecasts based on international uncertainty.
“Here in Australia we have advantages, including plenty of people in work and decent demand for our exports, but we will not be spared the consequences of a global downturn,” Chalmers warned.
“A weaker global economy with higher inflation and heightened risks makes it even more important that we deliver a responsible budget here at home, which is exactly what we will do next week.”
Finance Minister Katy Gallagher also gave a stark warning in an interview with Sky News on Sunday.
“We know the next 12 months will be quite difficult and we are not immune to that,” she said.
The treasurer said the budget would provide “responsible” relief from the cost of living, investments in the economy’s capacity and look into repairing the budget. The government is issuing budget announcements every day, including Sunday’s confirmation of $9.6 billion in infrastructure spending and foreshadowing cuts to regional grant schemes, which Labor claimed the former government had been allocated inappropriately.
On Monday, Health Minister Mark Butler will confirm that the budget will contain $47.7 million to fund bulk-billed telehealth psychiatric consultations in remote and rural Australia. From November 1, telehealth will be available again for these appointments, after being scrapped last year by the former coalition government.
“Even before the Covid-19 pandemic, people in rural and regional parts of Australia had higher mental health-related hospitalization and suicide rates than those living in cities. The reduction in the previous charge meant that many patients were forced to pay a differential fee or drop out of treatment, and some psychiatrists stopped providing services in rural areas,” Butler said.
The government expects around 100,000 consultations to be supported each year as a result of the change.
“Our rural and regional communities have endured drought, bushfires, floods and the impacts of Covid-19 in recent years – a perfect storm of factors that have had a significant impact on people’s mental health,” said Butler.