New figures on Wednesday are set to show Australia’s economy grew sluggishly in the June quarter, as it was dealt with blows by higher interest rates, price pressures and a Chinese slowdown.
But the Treasurer remains optimistic that despite stagnant growth, Australia is not on track for a recession.
The national accounts, which measure growth in the economy, will be released by the Australian Bureau of Statistics on Wednesday morning.
Ahead of their release, Treasurer Jim Chalmers warned that growth was likely to be “relatively flat”.
While the Reserve Bank on Tuesday left the cash rate steady for the third month in a row at 4.1 per cent, Dr Chalmers said the flow-on effects – coupled with international uncertainty – were “bucketing” the economy.
“It’s already clear to us that a combination of things like these interest rate rises, plus the international uncertainty represented by the slowdown in China and elsewhere, is having an impact on our economy,” he told ABC News.
“It is slowing our economy. Particularly when it comes to household spending – we have seen retail figures and other consumption data slow down quite considerably.
“It’s already clear to us the Australian economy is being bucketed by international uncertainty and higher interest rates.
“And we do expect growth in the economy to be relatively flat over the next 12 months or so.”
He said Australia “had things going for us” despite the substantial challenges, namely the “strong labour market, exports, education and tourism”.
“We’ve got the budget in much better nick in case we need to respond at some future point, so we’ve got things going for us, but the challenges to our economy are substantial” he told ABC Radio.
Unable to provide complete certainty that Australia would dodge a recession, Dr Chalmers said Treasury would be keeping a close eye on China as well as the ongoing implications of domestic inflation.
“Our expectation, our forecast in the budget, are that the Australian economy will continue to grow,but quite slowly,” he said.
In the three months to March, the economy grew just 0.2 per cent – 2.3 per cent on an annual basis.
Economists were slightly more optimistic about the June figures ahead of their release.