Jim Chalmers: Why Australians should be optimistic about 2025
Opinion: With the worst of the nation’s economic challenges behind us, there are lots of reasons for Australians to be confident about the year ahead, writes Jim Chalmers.
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On an especially muggy early morning this month, my seven-year-old daughter and I were walking the big hills near our Logan home in Queensland.
She was puffing and chatting away, and in her characteristically inquisitive way she asked me what my favourite year was. I said I couldn’t decide; we spoke about some of the good ones.
I asked her what her favourite year was and without hesitation she said “next year”.
I’ve been thinking a lot about that optimism.
I thought about it again watching Sam Konstas bat in the first session on Boxing Day, with the freedom and fearlessness of a teenager. Bringing joy to Australians at the end of what was an especially tough year in 2024.
Inflation has come down a lot but people are still struggling with cost-of-living pressures. Higher interest rates have hit household budgets hard.
There’s been a lot of uncertainty and conflict in the world that’s weighed on our economy here.
As a government, our focus has been fighting inflation and rolling out cost-of-living help.
After a difficult couple of years we shouldn’t forget the progress we’ve made together as Australians.
Our economy has continued to grow while other countries like the UK and New Zealand went into recession.
Inflation has more than halved since we came to office, it’s now at its lowest in almost four years and within the Reserve Bank’s target band.
The RBA’s latest minutes describe their increasing confidence that inflation is sustainably headed where we want it.
Real wages are growing and more than a million jobs have now been created on our watch, a record for any government in a single term.
The combination of tax relief, falling inflation, and wages and jobs growth means real disposable household incomes are also growing again in the latest numbers. They were going backwards when we came to office.
Our policies have helped ease some of the pressure on people.
We delivered a tax cut for every taxpayer and took a slice off electricity bills, with energy bill relief for every household.
We made childcare and medicines cheaper; strengthened Medicare; delivered more rent assistance; provided student debt relief; cracked down on the supermarkets to get a fairer go for farmers and families.
And we’ve done all this in a responsible way, while getting the Budget into surplus twice, shrinking the deficit this year, and pushing debt down by $177bn.
Even as we’ve made progress together in the aggregate numbers, we know it doesn’t always translate to how people are feeling and faring.
We see that in consumer surveys where confidence is still below where it’s been historically.
But since mid-year, those consumer confidence numbers have come up, with our income tax cuts playing a part.
We spent last summer working on these tax cuts, to ensure they delivered benefits to every taxpayer – not just some. It was one of the most important decisions we made as a government, the one I’m proudest of, but it didn’t come without political risk. Peter Dutton even called for an election over the tax cuts. So Australians would be worse off if Mr Dutton had his way on tax.
It’s another important reminder that the biggest risk to household budgets in 2025 would be a Coalition government that would come after Medicare again, push electricity prices up and wages down.
We can’t jeopardise the progress we’ve made together as Australians, in our economy.
There will still be challenges to meet in 2025, still people under pressure who need help. The outlook for China remains uncertain, and conflict and trade tensions are likely to weigh on the global economy next year.
Inflation has bounced up and down in the US, Euro area and the UK.
Despite all this, when we look at the direction of our economy now, we can be more optimistic about the year ahead. The worst of the inflation challenge is behind us, better days are ahead of us. 2024 was difficult but 2025 will be better.
We’ve been planning and preparing for a soft landing in our economy, and that’s what economists are now expecting. They expect inflationary pressures to ease further, growth to improve and unemployment to remain at or near historically low levels.
There are lots of reasons to be cautious and not complacent, but also lots of reasons to be confident and optimistic about the coming year.
Jim Chalmers is Federal Treasurer
Originally published as Jim Chalmers: Why Australians should be optimistic about 2025