With just a week until the federal budget is unveiled, Australian Treasurer Jim Chalmers has warned that economic challenges—including the impact of Ex-Tropical Cyclone Alfred and Donald Trump’s proposed tariffs—could strain Australia’s financial outlook.
During a speech outlining economic risks, protesters twice interrupted Chalmers, demanding the government halt new coal and gas projects. One demonstrator shouted, “When will the Labor Party stop funding new coal and gas projects?” before security escorted them out. Chalmers dismissed the disruption, saying, “Thank you, mate, off you go.”
Cyclone Recovery and Inflation Concerns
Chalmers highlighted that recovery efforts from Cyclone Alfred could deliver an immediate $1.2 billion hit to GDP, pushing total natural disaster funding in the budget to $13.5 billion. He warned that the economic fallout could shave 0.25 percentage points off quarterly growth while driving up inflation due to rising construction costs and food prices caused by damaged crops.
“We don’t yet know the precise cost to our budget, but it will be significant,” he said, adding that inflation—currently 2.5%—could face further pressure.
Trade Tensions and Tariff Risks
Beyond natural disasters, Chalmers raised concerns over Trump’s planned steel and aluminium tariffs, warning they could contribute to a weaker economic outlook for Australia. While the direct impact of tariffs may be minimal, Treasury analysis suggests the indirect effects could be up to four times larger, potentially cutting 0.1% from GDP by 2030.
“In a world of retaliation and escalation, the impacts of tariffs linger longer, leading to a bigger reduction in GDP and higher prices,” Chalmers warned.
However, he ruled out reciprocal tariffs against the U.S., saying, “Our response will not be a race to the bottom.”
Chalmers is set to deliver the federal budget next Tuesday, March 25.
