The Australian economy will likely avoid a recession despite the world economy being in “a dangerous place right now”, Treasurer Jim Chalmers said on Tuesday, ahead of the government’s first budget in two weeks.
Mr. Chalmers warned the global economy was heading for a substantial downturn and Australia would not be “immune” from that, but he said, his government’s expectation was Australia’s economy will go forward, not backwards.
Even though he admitted three main challenges inflation, the global economy and spending pressures will continue affect Australia economic growth, Australia Treasurer appeared to be optimistic.
The budget that I hand down won’t have an expectation or a forecast that the Australian economy falls into recession, he said.
Market, Some Economists Cautious
But Australia’s benchmark that has shed cumulatively about 7 per cent in the last two and yesterday even crossed below its 20-day moving average did not react positively to Mr. Chalmers’ optimism.
Rather concerned markets were down 0.5 points during the early afternoon trading hours in reaction to Australia's Treasurer statement.
Economists also cautioned that investors did not price the most recent hike in interest rate and expected at least one more this year, and two more immediately in the first quarter of 2023.
Indeed, last week the Reserve Bank of Australia warned of rising financial stability risks, which would be “magnified by a further substantial tightening in global financial conditions.”
Some economists observed that the Opec+ cartel’s decision on the oil production cuts will hit South-Asia’s economies strategically important for Australia.
Both World Bank and International Monetary Fund on Monday warned of a growing risk of global recession, citing concerns about slowing growth in advanced economies and currency depreciation in many developing countries.