Treasurer Jim Chalmers has raised concerns about the broader economic consequences resulting from the “quite extraordinarily large wave” of COVID-19 cases being seen in China.
The recent outbreak, which follows the end of China’s zero-COVID policy, will put significant pressure on the Chinese workforce, global supply chains and the local economy, according to the Treasurer.
Speaking with Sky News on Tuesday, Dr Chalmers identified this COVID wave as one of the five biggest risks for the Australian economy over the next year.
“China, obviously, is having this big wave of COVID. They’re transitioning from COVID zero to a different way of managing the pandemic,” he said.
“And so that has obvious consequences for their economy and therefore, for our economy as well, but that won’t be the only pressure on the Australian economy.”
Alongside China, the Treasurer also pointed to the war in Ukraine, the economic situation in the US, UK and Europe, the impact of interest rate rises and the ongoing threat of natural disasters as being among the main challenges for Australia in the year ahead.
“I’m optimistic about the future, but I’m realistic about prospects for the global economy and what that means for our own economy in 2023,” said Dr Chalmers.
“We are doing our best not just to batten down the hatches, not just to build buffers against all of this international economic turbulence, but also working a way around the clock to build a better future for people as well.”
The Treasurer noted that both Treasury and the Reserve Bank (RBA) expect the Australian economy will slow in 2023 as global pressures mount and the full effect of rate rises takes effect.
“Our job as a government is to provide a bit of cost-of-living relief where we can in the most responsible way that doesn’t add to inflation but also invest in our supply chains, invest in growth in our economy, invest in the future, and also manage the budget in the most responsible way that we can,” he said.
“If we do all of those sorts of things, I’m optimistic we will get through what will be a difficult year in the global and domestic economy, and get to the other side in a spirit of confidence that we’ve done what is necessary to get our people and our country and our economy through a difficult time.”
As for the RBA’s first interest rate decision of 2023, which will be handed down on 7 February, the Treasurer refused to speculate whether the central bank might choose to pause.
“Obviously the independent Reserve Bank will weigh up all of the considerations in the global economy and in our own economy,” Dr Chalmers said.
“They will be monitoring closely the impact of the rate rises which began before the election and the impact that they are having on the economy as well. And so those will all be parts of their considerations.”
In its latest statement of monetary policy, the RBA forecast that Australia’s GDP growth will fall to around 1.5 per cent in 2023, half of the estimated 3.0 per cent growth seen in 2022.
