Jim Chalmers:
We welcome the progress and dialogue that has been announced in the last little while when it comes to ending this war in the Middle East. From an economic point of view the end of the war can’t come soon enough. The consequences of this conflict on the other side of the world are already very serious for Australians, and they risk becoming severe.
We welcome the news that there will be more dialogue and, ideally, more progress towards an enduring ceasefire, the end of the war and the opening of the Strait of Hormuz in an ongoing way. The global economy desperately needs to see the free passage of shipping in the Strait of Hormuz. For that to happen we need to see an enduring ceasefire, we need to see an end to the war, and that’s why this progress announced today and this dialogue that will take place is a very welcome development from our point of view.
This is a dangerous moment in the global economy. As I said, the costs and consequences of this war are already serious. They do risk becoming severe. We saw that in the International Monetary Fund scenarios that they released earlier in the week. Australians haven’t chosen the circumstances of this war, but they are paying a very hefty price for it at the petrol bowser and beyond.
There couldn’t be a more important time for these engagements in Washington, D.C. I’ve been part of discussions chaired by US Treasury Secretary, Scott Bessent, at the G20. I’ve had important bilateral discussions with our key trading partners, particularly when it comes to fuel security. I met with my counterparts from Japan, South Korea, China, Indonesia, Singapore, the UK and also had some informal discussions with the Finance Minister of New Zealand. All of this is about joining with calls to end the war in the Middle East. From an economic point of view, as I said, we desperately need to see an end to this war. The best way to get energy prices back down over time is an end to the war in the Middle East.
Now, we also know – and it’s acknowledged, really, right around the G20 and beyond – that even when there is an enduring ceasefire, even when there is a proper end to this war and the Strait of Hormuz opens again, it’s expected to take some time before the global economy normalises, before these quite serious consequences start to normalise in our economy. There is an expectation around the G20 that this thing has a little way to run yet, and that it’s entirely possible that it will get harder in the global economy before it gets easier.
My discussions here are about an end to the war. They’re about fuel security, more robust supply chains, also an opportunity to compare notes and forecasts as we put the Budget together and release it in May, and also an opportunity to promote Australia as an investment destination. So it couldn’t have been a more important time. Very useful discussions bilaterally and in the G20 to make sure that we are carefully calibrating this government’s fifth Budget to the economic circumstances that we confront.
We’re putting this Budget together in very uncertain, very unpredictable, very volatile global conditions. It will be a responsible budget based on resilience and reform. It will strike the right balance between the pressures on people in the here and now and our intergenerational responsibilities. I’m confident that we’ll get those balances right, but I’m not complacent about it because we are hostage to developments in the Middle East.
Happy to take a few questions.
Journalist:
Mr Treasurer, President Trump has just told me, of Australia’s defence spending to 3 per cent, not 3.5 per cent as the Trump administration had asked for – he says ‘I’m not happy with Australia’. He went on to say, ‘They weren’t there in the Strait of Hormuz’. Is he right?
Chalmers:
I haven’t seen all of President Trump’s comments, but I’ve obviously been briefed on them. As I understand it, they were consistent with some comments that he has made in the past. As far as I’m aware there hasn’t been a formal request along those lines. And when it comes to defence investment, just yesterday Deputy Prime Minister Marles announced a very substantial step up when it comes to investment in defence. We don’t see defence as an optional extra or a ‘nice to have’ in this quite dangerous global environment that we inhabit. That’s why Richard Marles announced a very significant step up in defence spending yesterday.
There will always be calls to spend more on defence. We have made room in our budget for a substantial step up – around 3 per cent of the NATO measure of GDP – which is a very substantial increase. We understand and acknowledge that some of our partners would like us to invest more, but we are heading in the right direction.
Journalist:
But is he right or is he wrong?
Chalmers:
We’ll go to Michael and then come back to you.
Journalist:
On that point, the President was asked twice just now about that increase in defence expenditure, which is something that he had called for. And he ignored those questions and instead launched into criticism of Australia about its actions, or lack thereof, in Iran. So was that a waste now, because the President seems to have a problem with something else related to our military?
Chalmers:
No, these are important investments and what we’re ensuring is that we can substantially increase our investment in defence, get value for money and make Australia more secure in this very uncertain global environment. It’s not unusual for President Trump to call for more investment from partners and allies when it comes to defence. When it comes to the commitment in the Strait of Hormuz, as far as I’m aware there hasn’t been a formal request from the Americans along those lines.
Journalist:
So, on the point then, Treasurer, is the President wrong?
Chalmers:
I’m not interested in engaging with some kind of dispute with President Trump when it comes to these issues. The facts are –
Journalist:
Is that because you’re worried it could damage the relationship?
Chalmers:
The facts are, as I under it, that a formal request hasn’t been made. The facts are that Australia is quite substantially increasing its investment in defence. And, once again, it’s not unusual for partners, whether they be the US or others, to propose that Australia spends more on defence. We are spending more on defence and that’s for important reasons, and we’re getting value for money in the process.
Journalist:
Treasurer, the President has now said several times that he’s unhappy with Australia. What’s your understanding about what he’s unhappy about? And does it worry you that our major security partner is unhappy with us?
Chalmers:
Well, we’ve had a number of really important, very positive, very constructive engagements with President Trump and with the Trump administration. For my part, a number of discussions over the past year or more with Secretary Bessent. Prime Minister Albanese has got a great working relationship with President Trump. As you know, Prime Minister Albanese’s engagements here in Washington, D.C., not that long ago were considered to be very successful and very productive.
Now, as you rightly point out in your question, President Trump has made these kinds of comments before, and my response to that, as I’ve responded to your colleagues here, is that Australia is increasing its investment in defence. As far as I’m aware, there hasn’t been a formal request along the lines that you’re asking me about. We’ll continue to work with the Americans, with President Trump and with his colleagues, in Australia’s national interest.
Journalist:
Treasurer, have any of the meetings that you’ve just had changed your plans for the Budget?
Chalmers:
Well, this has been a really good opportunity to try and calibrate our budget deliberations with the international conditions. And so really all of the discussions I’ve been having, whether bilaterally or in the G20 or IMF and World Bank meetings, have been about making sure that we calibrate our Budget to the conditions, particularly the global conditions. It’s a time of uncertainty. There’s a lot of pressure and peril in the global economy. And so, of course, we have to factor that in.
Now, this won’t be exactly the same Budget that we would have handed down in February. It would be strange if it was given everything that’s happened in between. But it will still be an ambitious budget. It will be calibrated to the conditions. It will be responsible and it will be focused on resilience and reform.
Journalist:
Treasurer, have you contemplated delaying the Budget or handing that down because of the conflict?
Chalmers:
No, we intend to hand down a budget in a little under 4 weeks from now. Obviously we keep our budget settings under more or less constant review. But we’re pulling together the Budget for to release it on the 12th of May. And, as I said, we will do our best to take into consideration all of the developments around the world and especially in the Middle East.
You know, these developments are having a huge impact on our economy already and we expect that impact to continue. And so these discussions have helped us calibrate the Budget to the international conditions that make sure that we’re striking all the right balances between near‑term pressures, longer term obligations, resilience and reform. And I’m confident we can strike the right balance. But we are hostage to developments in the Middle East in particular, and that’s why this engagement has been so important.
Journalist:
Treasurer, one of Iran’s top military commanders has threatened to shut down traffic in the Red Sea. What kind of impact would that have on Australia should that happen?
Chalmers:
Well, it’s in Australia’s interests for there to be free passage in all of the key waterways around the world. We’re primarily focused on the Strait of Hormuz, but I’m aware that threats have been made about other important shipping routes. Really, the key pressure on Australians right now is coming from the effective closure of the Strait of Hormuz.
And the whole world, the whole global economy including the Australian economy is desperate to see the Strait reopen and for the free passage of shipping to begin again. And even when that happens we expect these pressures to have a long tail. So, we need to see free passage of ships, whether it be in the Strait of Hormuz or elsewhere. That’s absolutely fundamental to getting the show back on the road in the global economy.
Journalist:
Given that we need to uphold and maintain freedom of navigation of the Strait of Hormuz and elsewhere, just as you said, isn’t this an admission that really the entire military intervention by the US has backfired?
Chalmers:
Well, there are important strategic reasons why the Americans took the decisions that they took in the Middle East. You know, my focus is on the economic consequences of those decisions. Clearly, from a purely economic point of view the end of the war can’t come soon enough. It’s having a very serious and potentially quite severe impact on economies right around the world, including our own.
And so we want to see an end to these hostilities. We want to see the ceasefire stick. We’re encouraged by developments, including today. But until and unless the war properly ends and the Strait of Hormuz is properly opened, then Australians will continue to be under this kind of pressure, and that’s our focus.
Journalist:
Treasurer, you’ve had these discussions with your counterparts around the world, and that’s all good and well, but any solutions? Any new partnerships? Any deals that are actually going to come from these discussions?
Chalmers:
We’ve made some really important progress, particularly when it comes to our key partners in fuel security. There’s some ongoing work happening with the Singaporeans, for example, with the Koreans. You saw my colleague, Julie Collins, has struck a deal with the Indonesians around access to fertiliser. And so we’re making this progress in an ongoing way. There’ll be more to say on a couple of those fronts quite soon.
Journalist:
Any details?
Chalmers:
It’s all hands on deck when it comes to this engagement with our counterparts around the world, particularly when it comes to fuel security. There’s been one announcement made about access to fertiliser from our Indonesian friends. There’ll be more to say when it comes to Singapore and Korea and potentially others as well.
My job here is to engage and amplify the efforts of the Prime Minister, the Foreign Minister, the Energy Minister, the Resources Minister, the Agriculture Minister and others, and we’re pleased with the progress that we’ve been making in these discussions.
Journalist:
Treasurer, given the heavy impacts you’ve outlined of the war, and the fact we really don’t know when it will end and you’ve talked about the long tail are you now, to protect Australians longer term, are you now having to consider or even plan a model for the possibility of Australia going into recession?
Chalmers:
We expect our economy to continue to grow, but we are hostage to developments in the Middle East.
Journalist:
But are you considering a possible recession and what you would do in that situation?
Chalmers:
We’re not expecting one, but we consider a whole range of scenarios –
Journalist:
Including a recession?
Chalmers:
– from minor scenarios to more significant scenarios. Our current expectation is that the economy will continue to grow, but more slowly. I think it’s self‑evident when you have an oil shock of this magnitude and this nature that it will have impacts on inflation and on growth simultaneously. We don’t yet know how severe those consequences will be, but we already know that they are serious, as I’ve said in a couple of different ways already.
Now, it’s also important to remember that we face this considerable international uncertainty from a position of strength. We finished last year with faster economic growth than any major advanced economy. We got unemployment figures yesterday that had unemployment extremely low – 4.3 per cent, almost 1.3 million jobs created on our watch, 4 in every 5 in the private sector, most of the jobs created in March full‑time jobs. We also heard from the IMF and we saw in their data that was released in the fiscal monitor that Australia has got one of the 3 strongest budget balances in the G20.
There is a lot coming at us from around the world, but we’ve got a lot going for us as well. We do expect the economy to slow. We do expect there to be more upward pressure on inflation because of this oil shock emanating from the Middle East. Our expectation is that the economy will continue to grow but more slowly than we would have anticipated in January or February.
Journalist:
It’s evident that, rightly or wrongly, there’s a discrepancy between what President Trump is saying he requested of Australia and what Australia is saying was requested of them. So does the Prime Minister need to just get on the phone with the President and sort this out?
Chalmers:
The Prime Minister has spoken with President Trump on a number of occasions, including relatively recently, and those discussions will happen from time to time. When the Prime Minister engages in those discussions with President Trump, he’ll do so representing Australia’s national interest. What we’ve seen including in the last day is that Australia is increasing its defence investment, increasing its commitment to national security in our region and beyond, and we will continue to work closely with our American allies, whether it’s through AUKUS or in other ways, to continue to make sure that this relationship, this key relationship, is a mutually beneficial relationship in economic terms and also in national security terms.
Thanks very much everyone, appreciate it.