Jim Chalmers Projects Weaker Growth and Higher Unemployment

Australian Treasurer Jim Chalmers announced that the December mid-year budget update will project weaker economic growth and higher unemployment. He attributed the downturn to the combined pressure of high inflation and tighter monetary policy, which he noted is weighing on domestic activity and softening the labor market.

Recent data indicates unemployment reached 4.7% in September, the highest level in nearly five years. This decline occurs as the Reserve Bank of Australia and financial markets anticipate potential further interest rate hikes to combat inflation. The Australian Treasury is currently revising all economic numbers for the upcoming update.

Economists from ANZ and National Australia Bank warn that the next six to nine months will be challenging. ANZ specifically predicts a record peak-to-trough fall of 13.5% in capital city home prices. The government currently faces a policy dilemma, as reducing spending to fight inflation may accelerate unemployment, while providing cost-of-living relief could further exacerbate inflation.