Economy must modernise as ‘new rules of trade’ take affect, Treasurer Jim Chalmers warns

Jim Chalmers has warned of a “world of churn and change” which will impact the Australian economy as he outlines the plans for the next three years in government.

Jim Chalmers warns of a “world of churn and change”. Picture: NewsWire / Martin Ollman

Jim Chalmers has warned of a “world of churn and change” that will impact the Australian economy as he outlines plans to see the nation through the current uncertainty.

The Treasurer has warned “the rules of trade have changed”, meaning Australia will need to modernise its economy or risk living standards.

In a speech to the National Press Club on Wednesday, the Treasurer is expected to warn the Australian economy will be impacted by the weakest global growth in two decades, spiking oil prices out of the Middle East and a new global order.

Jim Chalmers warns of a “world of churn and change”. Picture: NewsWire / Martin Ollman

“It’s a perilous moment there and that means even more perilous times for the global economy too,” he will say, referring to the Middle East conflicts.

Mr Chalmers will highlight the IMF is currently saying trade uncertainty is seven times higher than just nine months earlier at a point higher than the pandemic.

“The rules and ideas that made up what we thought of as the global order are being rewritten,” he will say.

“This is the fourth economic shock now in less than two decades, a near permanent state of upheaval.

“Where shifts in energy, industry, demography and technology shape the bigger backdrop.”

Despite the global backdrop, Mr Chalmers will say Australia can achieve its goals by modernising the economy and “maximising our advantages.”

“In this world of churn and change we like our chances,” Mr Chalmers will say.

“But only if we make our economy even more resilient.

“By securing capital and shoring up supply chains, building more partnerships in our region and diversifying our trade and modernising our economy and maximising our advantages.”

The Treasurer’s speech will allude to pressures on global growth as outlined by the World Bank’s latest forecast.

Mr Chalmers warning follows a World Bank prediction of slowing economic growth. Picture: NewsWire / John Appleyard

Analysis released this week by the World Bank predicts global growth will slow to 2.3 per cent in 2025, down from 2.8 per cent this time last year. This is a downgrade of 0.4 per cent since the start of the year.

If the World Bank’s forecasts come true, this would be the weakest period outside of the worldwide recessionary periods of the GFC from 2007-2009 and the Covid pandemic at the beginning of the decade.

The World Bank’s bleak forecasts comes as the US GDP came in at negative 0.3 per cent for the first three months of the calendar year.

According to the latest ABS figures, GDP rose in the March quarter by 0.2 per cent and 1.3 per cent year-on-year.

But that anaemic growth was not enough to keep Australia out of a per capita recession, with the nation going backwards by 0.2 per cent per person.

Mr Chalmers will say the best defence to this slowing economy is to lift living standards, create a more productive economy and a stronger budget.

He will discuss the upcoming productivity round table to be held in August.

“By now our shortage of productivity growth is well known and broadly understood,” he will say.

“Almost every comparable country has the same challenge.

“Our own productivity problem hasn’t been with us for a couple of years, it’s been with us for a couple of decades.

“In the ten years before the pandemic, productivity grew only half as fast as it had two decades earlier.

“The 2022 election coincided with the largest quarterly fall in productivity growth in almost half a century.”

Mr Chalmers will say there was more work to be done, but it started with cutting taxes, boosting wages, restoring real incomes while also repairing the budget and fighting inflation.

“To deliver higher living standards for our people we recognise three blunt truths,” Mr Chalmers will say.

“Our budget is stronger, but not yet sustainable enough.

“Our economy is growing, but not productive enough.

“It’s resilient, but not resilient enough – in the face of all this global economic volatility.”

Originally published as Economy must modernise as ‘new rules of trade’ take affect, Treasurer Jim Chalmers warns