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WORDS: ERIC JOHNSTON
The hidden shocks  set to test the new Labor Government
Federal Election
There are big global forces coming down on Australia and some major budget shocks set to test incoming Prime Minister Anthony Albanese.
These are the hidden economic traps awaiting the new government.
The biggest interest rate rise seen in Australia in more than two decades will hit within weeks. That 40 basis point rise will likely be followed by another in July as the Reserve Bank seeks to tame raging inflation. Economists see the cash rate hitting up to 2 per cent by the end of this year, up from 0.35 per cent currently.
Interest rate hikes
Ballooning debt
The Treasury predicts Australia’s gross debt will peak at 44.9 per cent within the next three years, with more than $1.1 trillion in debt on issue. If growth rates slow, debt to GDP levels will rise, while sharper economic slowdowns will bring pressure to credit ratings.
Cost of living jump
The last budget’s 50 per cent cut to the fuel excise cost a net $3bn and is due to expire in August. This could add more than 0.25 per cent to inflation, and the cost of living jump could put intense pressure on the Albanese Government to extend the excise cuts.
A slowing global economy is on the cards, and any pullback in Chinese growth will have a magnified impact on Australia given the size of the trading relationship.
Slowing global economy
Combined deficits
The budget is forecast to have combined $225bn of deficits over the next four years, including $78bn next financial year, giving Labor very little room to move with its big ticket policy platforms including universal childcare and a multi-billion dollar future fund to build low-cost houses.
A labour shortage based on closed borders is the biggest issue for Australian business right now. However, a fast-tracking of immigration will ease pressure on supply and act as a stabiliser for an inflationary wages breakout while unemployment remains low.
Access to skilled workers
PRODUCER: BIANCA MASTROIANNI

Original URL: https://www.heraldsun.com.au/web-stories/free/herald-sun/economic-shocks-set-to-test-albanese-government