Treasurer warns of gloom from Trump tariffs
Treasurer Jim Chalmers will attack US President Donald Trump’s “self-sabotaging” tariffs, which could lead to the weakest global growth since the 1990s.
On Tuesday, Treasurer Jim Chalmers will deliver a preview speech for next week’s budget and is expected to say the global backdrop of “retaliation and escalation” and political instability could hurt Australia’s economic recovery.
The Treasurer will describe Trump’s tariffs as “a form of economic self-harm”, which could have flow-on effects around the world, leading to bigger increases in prices.
“They are self-defeating, and self-sabotaging,” Chalmers will say.
“More trade restrictions mean less growth and more inflation.
“The impacts of what we’re seeing will not be confined to one industry, or one community, or one quarter.”
The OECD’s economic outlook overnight Monday concluded that global inflation would hang around and growth would slow down in 2025 and 2026.
The OECD said global GDP growth was expected to moderate from 3.2 per cent in 2024 to 3.1 per cent in 2025 and 3.0 per cent in 2026.
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Annual real GDP growth in the US was projected to slow from its “very strong recent pace”, to 2.2 per cent in 2025 and 1.6 per cent in 2026.
Growth in China is projected to slow from 4.8 per cent this year to 4.4 per cent in 2026.
“Trade barriers are a key reason why [OECD] economists expect slower growth,” Chalmers will say.
“At the same time, they think inflation will linger for longer across the globe.
“The risk of recession in the world’s largest economy is rising too.”
Treasurer Jim Chalmers will deliver a preview speech for next week’s budget at the Queensland Media Club in Brisbane. Image: AAP
On a positive note, Trump’s tariffs on Australian steel and aluminium are forecast to have a direct hit of less than 0.02 per cent by 2030.
But the indirect consequences of Trump’s tariffs could have a 0.1 per cent impact on GDP by the end of the decade, according to Treasury estimates.
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Chalmers will say that “even in the most benign scenario, global growth over the next three years is expected to be its weakest since the 1990s”.
He will point the finger at the new Trump administration for “disrupting trade”.
“This is a time of serious volatility in a global economy, which is increasingly uncertain and unpredictable,” his speech says.
“A new US administration disrupting trade, a slowdown in China, a war in eastern Europe and a fragile ceasefire in the Middle East, political division and dissatisfaction around the world.”
Australia has already reached out to other nations affected by the tariffs in a bid to diversify and expand trading relationships, and the prime minister has hinted the budget will include money for a “buy Australian” campaign in a boost to local producers.
Chalmers is also expected to announce extra recovery funds in the aftermath of ex-tropical cyclone Alfred.
The disaster’s financial impacts are still being calculated, but it has already dealt a billion-dollar hit to GDP, caused the economy to shed 12 million work hours, and could dent quarterly growth or heat up inflation.
It is unclear exactly how much will be earmarked in the budget but it is expected to cost at least $1.2 billion, on top of $11.6 billion blocked out for disaster support at the mid-year economic and fiscal outlook.
Since MYEFO in December, the government has already announced more than $18 billion in new spending, including its $8.5 billion boost to Medicare, student debt relief and $7.2 billion for the Bruce Highway.
The Deloitte Access Economics’ Budget Monitor forecasts a $26.1 billion underlying cash deficit and revenue downgrades of $11.3 billion over four years.
The projection is slightly smaller than the $26.9 billion deficit predicted in the December mid-year economic and fiscal outlook.
