Jim Chalmers to meet top economic leaders in Washington DC as he finalises the budget

Treasurer Jim Chalmers has revealed he will speak to the US Federal Reserve chair about his rapid rate hikes which are driving down the Aussie dollar and fuelling our inflation crisis.

Jim Chalmers has sounded the alarm about aggressive interest rate rises around the world, saying central banks risk causing a “hard landing” in their bid to slow rampant inflation.

The Treasurer revealed he would speak to United States Federal Reserve chair Jerome Powell about his rapid rate hikes which are driving down the Australian dollar and fuelling our inflation crisis.

With the federal budget due in less than a fortnight, Dr Chalmers said it would contain targeted cost of living relief that did not add to inflation, as he ruled out any immediate changes to the stage three income tax cuts due to flow from 2024.

Speaking outside the White House in Washington DC, the Treasurer also said he expected the US was heading for a recession, despite President Joe Biden saying he believed it could be avoided.

Treasurer Jim Chalmers is in Washington. Picture: NCA NewsWire / Gary Ramage

Dr Chalmers is on a two-day visit to the US capital to meet with top economic leaders from around the world, saying it was crucial to “take the temperature off the global economy” to ensure the budget could be updated “in real time”.

This could include last-minute changes upon his return to economic forecasts as well as spending and revenue measures.

The Treasurer said recent interest rate rises worldwide represented the “sharpest synchronised tightening of monetary policy in the modern area”.

“The risk here is a hard landing brought about by the blunt and brutal application of tighter monetary policy,” he said.

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“The wider the gap between US interest rates and Australian interest rates, the more pressure there is on our own currency, which has consequences for inflation at home.”

Dr Chalmers said Australia’s economy was “in better nick than most countries” but that “we won’t be immune from another global downturn” that could play out over several years.

“The global economy is on the edge once again for the third time in a decade and a half,” he said.

Mr Biden said this week that he did not think there would be a recession in the US, and if there was, it would only be “a very slight recession”.

Dr Chalmers said he would not “second-guess President Biden’s assessment” but that there was a “broad expectation around the world that there’s a big risk of recession here in the United States”.

The International Monetary Fund’s forecast that a third of the global economy would shrink next year was a “very sober warning”, the Treasurer said, as he promised his first budget would “build buffers against this global turbulence”.

Having stoked a debate about the viability of the stage three tax cuts, which will deliver a flat 30 per cent tax rate for everyone earning between $45,000 and $200,000, Dr Chalmers said changes were off the table for now.

“The stage three tax cuts are around three budgets’ away as they’re currently legislated, so we’ve got more pressing priorities in the interim,” he said.

He promised to stick with Labor’s election commitments – including new spending on childcare, skills, housing and energy – and said that platform was “absolutely bang on” in the face of changing economic circumstances.

“If further tweaks are necessary when it comes to reprofiling some of our spending or other sorts of shifts in the budget, we’re prepared to make those changes,” Dr Chalmers said.

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Originally published as Jim Chalmers to meet top economic leaders in Washington DC as he finalises the budget