Peter Dutton warns US recession inevitable as Jim Chalmers commits to basic budget

The global economic conditions are “deteriorating” and will inevitably result in a recession, an Australian politician has claimed.

Opposition Leader Peter Dutton has declared the US will go into a recession, and “this Prime Minister knows what’s coming”.

The major call comes as Treasurer Jim Chalmers prepares to hand down his first budget next month that he says will be a “bread and butter” attempt to drive down inflation.

The opposition is warning him and Prime Minister Anthony Albanese to not take any missteps as Mr Dutton gave the most emphatic and dire declaration from an Australian politician yet that the US “will go into recession”.

It follows the US Federal Reserve's decision to raise rates to levels not seen since the global financial crisis in a bid to catch up with mounting inflation.

The US Federal Reserve has triggered a rate rise in a bid to curtail skyrocketing inflation. Picture: Spencer Platt/Getty Images

“There’s general agreement with the commentators and economists on the US going into recession, and the UK is likely to go into recession to say the least,” Mr Dutton said.

“There could be very significant headwinds over the course of the next couple of years, but governments always have those curveballs thrown at them, they always have issues to deal with.

“This Prime Minister knows what’s coming.”

While economists are warning that could have a trickle-down effect on the Australian economy, Mr Dutton is hopeful it will avoid any such headwind.

“In my judgment, we won’t have a recession here unless Labor really, really stuffs up,” he said.

“That’s my concern, that they make the wrong decisions.”

The US ‘will’ go into a recession, Opposition Leader Peter Dutton has said. Picture: NCA NewsWire / Gary Ramage

Writing in The Australia on Friday, Mr Chalmers reiterated that while there would be a “small” $50bn improvement to the budget bottom line, that needed to be taken with a grain of salt given the “deteriorating” conditions the world faced.

“While those budget improvements are temporary, the spending pressures are constant and compounding,” he wrote.

“Our task is to make the budget, our economy, our people, and communities more resilient.

“It means trying to deal with the issues in our clogged supply chains that are forcing up inflation and providing relief from rising prices that delivers for the economy that doesn’t force the RBA’s hand on further rate rises.”

Among the considerations could be the future of the first-home buyers grant, which Reserve Bank governor Philip Lowe earlier this month credited as having pushed inflation up at least two percentage points.

Mr Dutton said he would await to see whether any measures considered “too generous” by Labor would be wound back in the budget.

“Home ownership in our country is especially important … And every government should be doing what it can to provide support because it’s a significant asset,” he said.