Jim Chalmers responds to IMF’s grim global economic forecast

Australians have been warned a grim new international economic forecast could play into the upcoming federal budget.

Australians have been warned a dire new international forecast showing the world faces the worst five years for economic growth in more than three decades may play into the upcoming federal budget.

Treasurer Jim Chalmers said on Friday the government would continue to “take account” of international developments as it finalised the budget over the coming weeks before its release in May.

Dr Chalmers made the comments in response to International Monetary Fund managing director Kristalina Georgieva’s assessment of the global economy’s prospects.

In a speech she gave in Washington DC on Thursday, Ms Georgieva warned the IMF’s outlook for global growth over the next five years was the weakest since 1990.

The main drivers were higher interest rates drove up borrowing costs and the persistent economic aftershocks of the Covid-19 pandemic and Russian invasion of Ukraine, Ms Georgieva said.

Australians aren’t expected to get any cash handouts in this budget. Picture: NCA NewsWire / Nicholas Eagar

Dr Chalmers echoed Ms Georgieva’s comments, saying high inflation and interest rates across the globe and the effects of the war in Ukraine were contributing to slower global growth and greater uncertainty.

He also indicated the Australian market hadn’t emerged unscathed from the “recent tremors in the international financial system” such as the recent collapse of the Silicon Valley and Signature banks in the US and the emergency takeover of global lender Credit Suisse in Europe.

“In such uncertain times, it’s critical that the May Budget strikes the right balance between targeted cost of living relief, responsible fiscal management and laying the foundations for future growth,” he said.

Dr Chalmers has made similar comments many times before as he seeks to soften expectations about what the budget can reasonably deliver amid global economic turmoil and the mounting costs of vital public services.

The bulk of the work on the federal budget is understood to have been completed, with any revisions or finishing touches to be added before next month.

The Albanese government has revealed scant details of the May budget to date apart from routinely saying it will be “responsible” and show “restraint” when it comes to deciding how to dole out public funds.

Treasurer Jim Chalmers routinely says the budget will be responsible. Picture: NCA NewsWire / Gary Ramage

One of the only budget items Labor has announced so far is an extra $535m for Australia’s cultural institutions such as the National Gallery in Canberra after years of underfunding.

In addition, Anthony Albanese announced on Friday the government would give $6m over the next three years to the Royal Children’s Hospital annual Good Friday Appeal, to support the work of hospital staff and researchers.

The budget is also expected to include funding to cover energy bill rebates which the government promised late last year when it legislated caps on the wholesale cost of coal and gas in an attempt to rein in soaring electricity prices.

But Labor has indicated there won’t be any direct cash handouts in the budget because of fears these would only make inflation worse even if they temporarily helped Australians struggling with the cost of living.

Australia’s inflation rate hit 6.8 per cent in the 12 months to February.

The figure declined from its high in December but the Reserve Bank forecasts inflation won’t return to its target 2-3 per cent range until 2025.

The RBA put a pause on the most aggressive tightening of monetary policy since the 1980s last week to give the central bank’s board more time to assess the effects of its 10 successive interest rate rises.

Originally published as Jim Chalmers responds to IMF’s grim global economic forecast