Australian Treasurer Says No Recession Expected Despite Bleak Economic Performance

Australia's Treasurer Jim Chalmers delivers a speech at the National Press Club in Canberra, Australia, on May 15, 2024. Tracey Nearmy/Getty Images

Australian Treasurer Jim Chalmers has declared that the country would not fall into a recession despite weak economic growth.

According to the latest national account figures, Australian GDP (gross domestic product) grew by 0.1 percent in the March 2024 quarter, down from 0.3 percent in the previous three months and 0.2 percent in the September 2023 quarter.

At the same time, GPD per capita dropped by 0.3 percent during the period, marking the fifth consecutive quarterly fall.

The bleak performance of the economy has raised concerns about a potential economic downturn.

However, during an interview on June 6, Mr. Chalmers rejected the idea of an upcoming recession.

“That’s not our expectation,” he told the Today show.

“The economy barely grew in the first three months of the year. We knew it was going to be weak.

“There’s no shortage of challenges in the economy, but I think what the budget has shown is that we don’t just acknowledge those challenges ... we’re acting on them.”

Mr. Chalmers’ statement aligned with the view of Reserve Bank of Australia (RBA) Governor Michele Bullock, who rebuffed suggestions that the Australian economy was a heartbeat away from recession.

“I wouldn’t put it quite like that. I would say that we are in a position where the economy is very weak,” she told a Senate committee on June 5.

“We’ve got people cutting back on discretionary expenditure, but we’ve still got the labour market growing.

“And that’s a very important point to remember, that the unemployment rate is rising gradually, but employment is still growing.”

Treasurer Blames Weak Economic Growth on High Interest Rates

While Mr. Chalmers said there were many factors behind the weak economic growth in the past quarter, he said high interest rates had a role in dampening the economy.

“What we’ve seen over the last 12 months or so is the impact of these rate rises that are in the system,” he said.

“The rate rises began before the election and continued after. We’ve spoken about it before—that’s putting people under a lot of pressure, and it’s slowing the economy as well. There are some other factors too.”

The RBA  has maintained the official cash rate at 4.35 percent since November 2023 due to a noticeable drop in inflation during the period.

Under the current economic situation, the treasurer said the focus of the government was to fight inflation “without smashing the economy” and provide cost of living relief in “the most responsible way.”

“Next month, every Australian taxpayer will get a tax cut. Every household will get energy bill relief,” he said.

“There’s a wage rise for people on awards. There’s help with cheaper medicines. There’s help with rent and student debt.”

Shoppers at Westfield Bondi Junction shopping centre in Sydney, Australia, on April 19, 2024. Lisa Maree Williams/Getty Images

In the recent May federal budget, the Labor government offered a $300 (US$200) energy rebate for every household and a $325 rebate for one million small businesses as part of a $3.5 billion spending package.

While Ms. Bullock said the energy rebate would affect the headline inflation, she said the impact would not be material.

“It is helping people who clearly are hurting at the moment, but I don’t think it’s material in terms of our forecast for inflation and if you look at the error bands around the inflation forecast, I think that’s even more pertinent,” she said.

Opposition’s Response

Meanwhile, Shadow Treasurer Angus Taylor said the latest national accounts data was a “wake up call” for Mr. Chalmers and Prime Minister Anthony Albanese.

“It shows the slowest GDP growth since 1991, outside the pandemic. This is the fifth consecutive quarter of negative GDP per person growth,” he said.

“Australia is in an entrenched household, consumer confidence, and productivity recession.”

In addition, Mr. Taylor claimed the government’s extra spending in the past years had driven inflation and caused economic problems.

“Labor’s $315 billion in extra spending, productivity-killing workplace relations changes, and billions of off-budget funds are causing higher inflation, higher interest rates, and higher taxes,” he said.

“This is a path to ruin, not recovery.”