Treasurer Jim Chalmers casts grim forecast on revenue figures due to softening labour market, falling iron ore prices

Jim Chalmers has warned Australia’s revenue forecasts “will be much smaller” due to tanking commodity prices, warning any upgrade will be “a sliver” of what has been reported in Labor’s previous four budgets. The Treasurer’s second ministerial statement on the economy greatly differed from the response from shadow treasurer Angus Taylor, who said Australians ”were poorer” under Labor. Ahead of the Mid-Year Economic and Fiscal Outlook (MYEFO) due in December, Mr Chalmers said Australia’s fiscal outlook had become more “challenging” due to a softening labour market and tanking iron ore prices driven by China’s weak property sector. “In each of our four budget updates there were $80bn in revenue upgrades, on average. But with the labour market softening around the edges, this trend is diminishing,” he said on Wednesday. “This has been compounded by structural challenges in the Chinese economy weighing on key commodity prices – iron ore prices are down 30 per cent since the start of the year. “As a result of these factors, I can inform the House that Treasury expects any revenue upgrades in the mid-year outlook will be much smaller.” Treasury also expects company tax receipts to be smaller, the first downward revision since 2020. “There’s still a fair bit of data to land before MYEFO, including national accounts and tax collections, but Treasury’s latest estimate is that any upgrade will be a sliver of what we saw in those first four budget updates,” he said. The December update is also expected to reveal overall growth in Australia’s economy will be “slow” – a trend that is expected in the “near term” and mirrors “soft and subdued” global expectations. However, Mr Chalmers said Australia had fared better than other countries, and said Australia is on track to acheive a “soft landing” amid high inflation that peaked at 7.8 per cent in the December 2022 quarter. While Mr Chalmers’ speech echoed a “very cautious confidence and emerging optimism,” Mr Taylor attacked the government for fuelling inflation through spending, and dismissing Mr Chalmers’ predicted soft landing. In what appeared to be Labor and the Coalition drawing its economic battlelines ahead of the election, Mr Taylor borrowed rhetoric from the US election, stating the standard-of-living “has collapsed” for Australian households. “Now the reality is prices are still rising, and Australians have now experienced almost three years of above bad inflation,” he said. “The price level is what Australians are feeling, and that is why inflation needs to be attacked aggressively and early, and this government has failed.” Repeating a second Opposition attack line, Mr Taylor said the Coalition would get Australia “back on track”. “We need to get the economy back to basics, fighting high prices and interest rates first, winding back regulatory roadblock, boosting productivity and delivering lower, simply, fairer taxes,” he said.