Australia ‘not immune’ to China chaos

Speaking in Queensland on Monday, Dr Chalmers said while he is “optimistic” about the economic outlook for 2023, the Labor government is remaining “realistic” about what the next 12 months has in store.

“Most people expect 2023 will be a difficult year in the global economy,” he told reporters in Queensland on Monday.

“We won’t be completely immune from that.”

Dr Chalmers said China’s management of its latest Covid outbreak, the ongoing invasion of Ukraine and the impact of ongoing rate rises from the RBA would all play major roles in Australia’s economic outlook over the coming year.

“This year will be about more than battening down the hatches, more than building our buffers against another global downturn. It will be about building a better future so that Australians can grow out of this global downturn the right way – strong, inclusive, sustainable,” he said.

China’s abrupt switch from its zero-Covid policy to a “new phase” of living with the virus late last year has sparked a “substantial wave” of new cases, which is already having a big impact on economic activity.

“The Covid wave in China is already having a substantial impact on supply chains. We expect that to get more difficult before it eases,” Dr Chalmers said.

“When you’ve got a Covid wave like we’re seeing in China, when they’ve had until quite recently a zero-Covid approach to managing the pandemic, then that has obvious consequences for the Chinese workforce and for supply chains right around the world.”

The Treasurer said another major factor in how the nation fared economically would be the large proportion of Australians coming off fixed-rate mortgages over the next year.

“They’ll roll off a low fixed rate onto a much higher variable rate and that understand that will put a lot of pressure on household budgets,” he said.