Australia could avoid recession even if global economy slows down

Australian Treasurer Jim Chalmers said that Australia is expected to be able to avoid a recession due to favorable conditions created within the country and able to protect the economy from growing global risks.

In his speech ahead of a visit to Washington to attend the annual meetings of the International Monetary Fund and the World Bank, Chalmers said that Australia is able to weather the global downturn thanks to low unemployment and high commodity prices.

Chalmers also said that a downturn in the Australian economy is not expected, but the global economy is not a safe place.

In two weeks, the Australian Treasurer will propose a first draft of the budget for the coming year, taking into account the soaring global interest rates, which are designed to cool inflation and demand, as well as slow down the global economy.

Chalmers said the goal of his financial program will be to protect households from inflation, as well as the possibility of investments in supply chains, which can help ease price pressures. At the same time, he noted that the government will try to implement these actions without increasing demand in the economy.

“We want to make sure that the cost of living support we provide will not complicate the already difficult job of the independent Reserve Bank (RBA). We are aware of this,” said Jim Chalmers.

The pace of policy tightening in Australia has slowed down this month. The Reserve Bank raised rates by only a quarter of a percent after four consecutive 0.5% hikes.

This situation differs sharply from the situation in the US, where the Federal Reserve raised the key rate by 75 basis points three times in a row.

Chalmers believes that one of the reasons for the weakening of the Australian currency is the existing difference in interest rates between the US and Australia. The Australian dollar has fallen 17% since early April and is currently trading below $0.63.

Chalmers said the cost of imports is rising due to this depreciation, which could have an impact on inflation.