(Bloomberg) -- China’s slowdown, weaker domestic growth and the need for additional spending in some areas are delivering headwinds for Australia’s economy, Treasurer Jim Chalmers said ahead of a budget update.
Chalmers will on Wednesday set out the country’s Mid-Year Economic and Fiscal Outlook, aiming to persuade voters that the center-left Labor government can spur expansion ahead of a national election that must be held by May 17.
“Challenges in the Chinese economy will have flow on effects for our own budget and that will be clear in Treasury’s forecasts,” Chalmers said Sunday in a statement. “The global economy is uncertain, the global outlook is unsettling and that’s weighing heavily on our economy.”
Policymakers in the world’s second-largest economy announced a raft of stimulus measures in September aimed at keeping China on track to hit its 2024 growth target of around 5%.
Still, weaker Chinese demand for commodities like iron ore means Australia’s Treasury will need to downgrade export earnings in the mid-year update by A$100 billion ($64 billion) over the four years to 2027-2028, according to a department spokesperson. Company tax receipts will also be revised down by A$8.5 billion over the same period.
Australia’s gross domestic product rose 0.8% last quarter from a year earlier, the weakest reading — excluding the pandemic — since December 1991, when the nation’s economy was in recession, according to official data released earlier this month.
Earnings from iron ore are forecast to decline on waning prices that have dropped about a quarter this year amid higher production and weaker demand because of the slump in China’s property sector. The value of shipments of coal and liquefied natural gas are also expected to fall, according to government projections.
“There will be substantial pressures on the budget,” Chalmers said Sunday in an interview with Sky News.
Australia’s government is handling the impact of higher spending on payments to military veterans and in areas including natural disasters, early childhood education and health, Chalmers said in the interview. The mid-year update will include details of an additional A$1.8 billion in entitlements to veterans, he said.
(Updates to add comments on China from first paragraph)
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