Treasurer Jim Chalmers has moved to de-escalate concerns of a looming economic contraction, pushing back against interpretations of Reserve Bank Governor Michele Bullock’s recent warnings.
Speaking on March 18, Chalmers emphasised that neither the Treasury nor the RBA is currently forecasting a recession, despite the central bank’s decision to lift the cash rate by 25 basis points to 4.1%—the second consecutive monthly increase aimed at taming stubborn inflation.
The Treasurer's comments follow a candid assessment by Governor Bullock, who noted that while the board does not desire a recession, further tightening remains a possibility if inflation fails to cool.
"We need to be very careful about how we talk about this," Chalmers told television interviewers, asserting that the Governor's remarks were "entirely consistent" with the government’s own outlook.
He cautioned against misconstruing her analysis of global volatility as a definitive forecast of a domestic downturn.
The economic landscape remains clouded by soaring petrol prices and instability in the Middle East, which has rattled global oil markets.
While a minority of the RBA board voted to hold rates steady due to these external risks, the majority opted for a hike, citing the internal threat of domestic inflation.
Chalmers acknowledged that while the conflict would undoubtedly provide a "hit to growth," Treasury modelling suggests a slowdown rather than a "dramatic contraction."
He warned, however, that even a swift resolution to global tensions would leave a lasting mark on the Australian economy, labelling any expectations of an immediate recovery as "naive."