Chalmers’ urges G20 nations to reward critical minerals producers and issues ’weak growth’ warning

Jim Chalmers warns of slower economic growth and urges G20 nations to ‘reward’ producers amid plunging lithium and nickel prices.

Treasurer Jim Chalmers will deliver two speeches on Thursday at the G20 finance ministers and central bank governors meeting in Sao Paulo, Brazil. Picture: Martin Ollman/NCA NewsWire

Jim Chalmers has warned that Australia faces a significant ­economic growth slowdown and will urge G20 nations to ­“reward” critical minerals producers, as plunging lithium and nickel prices threaten domestic mine operations.

Ahead of what are anticipated will be gloomy national accounts figures next week, the Treasurer will tell G20 finance ministers and central bank governors in Brazil that, while inflation remains a major concern, their focus was rapidly shifting to flatlining economic growth amid global recession fears.

Dr Chalmers’ comments came as consumer price figures for January showed annual inflation remained at more-than-two-year lows of 3.4 per cent, bolstering hopes the Reserve Bank is done hiking and will be in the position to cut interest rates later in 2024.

Ahead of the key Dunkley by-election on Saturday, however, the Australian Bureau of Statistics data showed Australians remained under intense cost-of-living pressures, despite generous taxpayer-funded energy bill relief for vulnerable households.

Rents were up 7.4 per cent on a year earlier, even after boosted commonwealth assistance, while grocery prices were 4.4 per cent higher, with staples such as cheese and bread up 6-8 per cent.

The Albanese government is working on a suite of measures ahead of the May 14 budget to provide incentives for clean energy projects and production tax credits to support nickel and lithium miners that are struggling amid a China-backed flooding of the market.

Following the collapse in lithium and nickel prices and warnings from Australian miners that critical minerals and rare earths operations are under threat, Dr Chalmers will warn that critical minerals industries and supply chains “are not reliable enough nor sustainable enough”.

“Right now, we don’t have the right market structures to reward global producers that improve their environmental and social footprint,” the Treasurer will say.

“We should look to reward sellers that invest in improving the quality and sustainability of critical minerals. This should include consideration of a differentiated international trading market for resources produced to higher ESG (environmental, social and governance) standards.”

The Albanese government is working with partners around the world to protect the nation’s critical mineral industry, amid a massive jump in production of low-grade nickel in Indonesia that is being heavily backed by Beijing.

The Australian revealed this week that Trade Minister Don Farrell was aiming to tap billions of dollars of investment from some of the world’s largest sovereign wealth funds for the extraction and processing of key critical minerals by advancing a free trade deal with the United Arab Emirates.

The federal government has added nickel to the critical minerals list, opening up one path to funding for nickel miners. Anthony Albanese has flagged the government is working through details of an assistance package.

After Japan and Britain this month plunged into technical recessions, Dr Chalmers on Thursday will caution that “the soft landing we seek at home and in the global economy is assumed but not assured”.

Dr Chalmers, who arrived in Sao Paulo on Wednesday, will say: “Around a quarter of the G20 has recorded a recession or just narrowly avoided one … this is before the lagged effect of the synchronised tightening of monetary policy is fully felt.”

National accounts figures next Wednesday are expected to show a sharp deceleration in economic growth. Following 3.1 per cent economic growth in 2022-23, Treasury in December forecast 1.75 per cent growth in 2023-24.

“Inflation remains our major concern but for most of us the balance of risks in the economy has shifted, is shifting, or will shift before long from inflation to growth,” Dr Chalmers will say.

“Australia is neither immune from all of this nor complacent about any of this. We expect growth in next week’s December national accounts to be quite weak … the inevitable consequence of global uncertainty, higher interest rates, and cost of living pressures.

“Inflation has moderated substantially in Australia since its peaks in 2022 and the monthly inflation gauge that came out (on Wednesday) is further evidence that inflation is moderating in welcome ways – but we’d like it to moderate further and faster.”

KPMG chief economist Brendan Rynne warned Australia could yet follow Japan and Britain into recession. “It will be a close-run thing as to whether they (next week’s national accounts) show the economy is going backwards,” he said. “There is a risk that Australia could not only be in a per-capita recession, but could also tip into a technical recession (defined as the economy shrinking for two consecutive quarters).”

Under pressure from business groups and employers to accelerate Labor’s economic reform agenda, Dr Chalmers outlines a three-point plan focused on “relief, repair and reform” in his G20 speech.

Labor’s reform priorities are: the energy transformation, labour markets and human capital; data and digital technology; and making the economy more dynamic, productive and competitive.

Putting in place reforms to lift the nation’s competitiveness and efficiency have take on extra urgency in the wake of a collapse in productivity over the past two years that has sent firms’ labour costs soaring and threatens to undermine the Reserve Bank’s inflation fight.

EY senior economist Paula Gadsby said the new consumer price report supported the case for the central bank to hold interest rates unchanged at the end of its next two-day board meeting on March 19, but that it was still too “premature” to be talking about cuts. She said the latest figures should be read with caution.

“Talk of rate cuts could be premature as risks persist into 2024, especially if wages growth – the major driver of inflation – fails to ease, and productivity doesn’t pick up to the long-run levels the Reserve Bank is ­counting on,” Ms Gadsby said.

In a second G20 speech delivered overnight on the “role of economic policies to address inequalities”, Dr Chalmers said the three big shocks of the past 15 years – the global financial crisis, the Covid pandemic and the global inflation spike – had undermined equality.

“All risk turbocharging the inequalities and vulnerabilities which threaten our communities and our economies and diminish our politics,” the Treasurer said.

“Our response must be to embrace and shape change rather than barricade ourselves against it. We must do everything we can to ensure our people are the beneficiaries of this change rather than victims of change.

“Our agenda needs to be middle-out and bottom-up, not top-down. This demands a focus on the labour market and ensuring people can earn more and keep more of what they earn.”