Australia’s Treasury Minister Katy Gallagher has warned that Australia and the world are facing the risk of global stagnation and high inflation. This is a situation known as stagflation.
of Its latest annual reportThe Bank for International Settlements (BIS), also known as the Central Bank of the Central Bank, said the global economic development over the past year was shaped by the COVID-19 pandemic and the Russia-Ukraine War.
“This combination of forces provides a challenging outlook,” BIS said.
“The combination of high inflation, high levels of volatile commodity prices, and significant geopolitical tensions creates an unpleasant analogy to past episodes of global stagflation.”
In addition, the report noted China’s uncertain growth outlook as a risk factor for the outlook for the global economy.
“Unlike in the past, today’s stagflation can occur with increasing financial fragility, such as rising asset prices and rising debt levels, which can further slow growth,” the agency warns. I am.
After reading the report, the Finance Minister said that the stagflation caused by the BIS is the worst scenario, but it is true that the Australian economy is facing many difficulties.
“We have living costs going through the roof, interest rates rising, wages still stagnant, which presents some real challenges to people.” She told sky news..
“Government’s job is to see how we can formulate our policies. Our wise investment promotes the capacity of the economy.
The investments proposed by the Labor government include childcare reform, skills training, and spending on renewable energy.
“They help the economy in the long run without increasing inflation in the short run,” Gallagher said.
Nevertheless, the investment promised by the Labor Party during the federal elections was expected to hit the federal budget by $ 7.4 billion ($ 5.19 billion) over the next four years.
Australian economy benefits from high commodity prices
Despite having brought many volatile factors to the global economy, Russia’s invasion of Ukraine pushed commodity prices to very high levels and brought direct benefits to Australia.
The Treasury released its May 2022 financial statements, revealing a fundamental budget deficit of $ 33.4 billion.
This figure was less than half of the $ 20.8 billion projected deficit from 2021 to 2022 in the March budget, due to high commodity prices.
The finance minister welcomed the budget improvement, but she said it wouldn’t last long.
“We’re seeing improvements. It’s a very volatile region, especially around commodity prices, and we saw some softening in the region last week,” Gallagher told ABC Radio.
“I don’t think (budget improvements) will continue at this rate.”
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Alfred Bui is a Melbourne-based Australian reporter with a focus on local and business news. He is a former small business owner and holds two master’s degrees in business and business law. Contact him at [email protected].