Treasurer Jim Chalmers warned that economic pressures are becoming very substantial and intensifying, but said he is not preparing for a recession as he looks for ways to cut the federal budget before the mid‑year update. He urged critics of government spending to identify services that could be trimmed and blamed the private sector for driving up inflation amid the ongoing conflict in the Middle East.
Chalmers said the eight‑month US‑led war against Iran has severely curtailed oil supplies from the region, which he described as disastrous for cost‑of‑living pressures. He added that the longer the conflict persists, the greater the impact on the global economy and on Australia, whether through inflation or downward pressure on growth. Inflation has risen to 4% in the year to August from 3.5%, and the Reserve Bank has lifted its key interest rate to 4.6%, the highest level since 2011.
He noted that cuts to government spending are not the sole driver of inflation and that larger cuts would harm essential services such as Medicare. He called on the public to suggest where reductions should be made if people do not want stronger Medicare, income‑tax cuts or other cost‑of‑living relief. Shadow treasurer Tim Wilson accused Chalmers of stoking inflation to generate tax windfalls and of creating sovereign risk. Assistant science and digital technology minister Andrew Charlton warned that a recession would be devastating, pushing many into unemployment and eroding demand.
Chalmers will travel to Japan to meet business leaders and the finance minister in an effort to boost investment and improve fuel security.
