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Don’t panic: Chalmers warns that ‘quite weak’ growth report on the way

Australians should not be surprised by a weak economic growth report next week, the treasurer has warned.

Feb 29, 2024, updated Feb 29, 2024
Treasurer Jim Chalmers. (AAP Image/Lukas Coch)

Treasurer Jim Chalmers. (AAP Image/Lukas Coch)

Delivering a speech to other finance ministers at G20 talks in Sao Paulo, Brazil, Jim Chalmers was managing expectations before the December quarter national accounts as well as tilling the soil for a policy package to drive investment in green industries.

He said critical minerals industries and supply chains were not reliable enough or sustainable enough.

“Right now, we don’t have the right market structures to reward global producers that improve their environmental and social footprint.”

He urged other finance leaders to collaborate on the issue and consider rewarding sellers who invested in improving the quality and sustainability of critical minerals.

“This should include consideration of a differentiated international trading market for resources produced to higher ESG standards,” he said.

The federal government has been working on a response to the United States’ $600 billion Inflation Reduction Act.

The Biden Administration’s scheme includes generous tax incentives for clean energy and other key technologies and has triggered a global investment race.

Dr Chalmers also took the opportunity to touch on the economic outlook for Australia and the rest of the world.

“Inflation remains our major concern but for most of us the balance of risks in the economy has shifted, is shifting or will shift before long from inflation to growth,” he said.

“The soft landing we seek at home and in the global economy is assumed but not assured.”

Australia will get an update on its economic activity next week in the December quarter national accounts.

The treasurer warned growth could be “quite weak”.

“The inevitable consequence of global uncertainty, higher interest rates and cost of living pressures,” he said.

Monthly inflation data came in softer than expected on Wednesday, which supported KPMG chief economist Brendan Rynne’s expectation of no more interest rate hikes in this cycle.

“Given the slowing economy, we believe it might reduce the cash rate sooner and faster than currently envisaged,” Dr Rynne said in a note.

The economist said the December quarter GDP figure would be a “close-run thing as to whether they show the economy is going backwards with negative growth”.

“There is a risk that Australia could not only be in a per capita recession – given four out of the previous five quarters showed real GDP per capita declining – but could also tip into a technical recession,” he said.

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