Australia to reduce economic growth forecasts due to lower consumer spending

© Stocksak. FILE PHOTO. People shop at South Melbourne Market during the second day of relaxed coronavirus disease lockdown regulations (COVID-19), in Melbourne, Australia. October 23, 2021. REUTERS/Sandra Sanders

SYDNEY (Stocksak), Australia’s economy is expected to slow sharply next fiscal year due to rising inflation, according to new forecasts by Treasurer Jim Chalmers to be revealed in Tuesday’s budget.

Budget papers will show that gross domestic product (GDP), for fiscal 2023-2024, will be reduced to 1.5% from the 2.5% forecasted in April. Draft figures from Treasury show that GDP will be downgraded to 3.5% for 2022-2023 from 3.5% for 2023-2023.

The drop in household spending is attributed to a slump in consumer expenditure, rising prices, and the largest jump in interest rates in decades.

Officials warn that a slowing global economy will have a negative impact on growth in Australia, which is currently experiencing its lowest unemployment rate since 1970s.

“While we have plenty of things going for us, Australians have not been immune from rampant global inflation, heightened uncertainty and cost of living pressures here at home,” Chalmers said in a statement on Monday.

“These headwinds are inevitably going to impact our growth outlook. Australians already feel the pinch of higher prices and rising interest rate.”

Analysts anticipate that record commodity prices, a booming labour force market will provide budget relief. Analysts expect the deficit shrinking to between A$25 billion to A$45 billion, which is lower than initially believed.

Chalmers has warned Australians repeatedly to expect a responsible budget. He stated that the government can only provide limited cost of living support to avoid the Reserve Bank of Australia adding stimulus that is incompatible with rate hikes.

Chalmers stated that a responsible budget is the best defense against these economic headwinds, along with cost-of-living relief responsible enough to not make the job of Reserve Bank more difficult.

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