Australia to avoid recession even as world slows, treasurer says

CANBERRA - Australia is expected to avoid recession due to strong domestic conditions that will help shield its economy from mounting international risks, Treasurer Jim Chalmers said.

Speaking ahead of a visit to Washington for the International Monetary Fund and World Bank annual meetings, Mr Chalmers said Australia was well placed to weather a global downturn because of low unemployment and high commodity prices.

"It's not our expectation that the Australian economy will go backwards," Mr Chalmers told reporters in Canberra on Tuesday. "But the world economy is a dangerous place right now."

The treasurer will deliver his first budget in two weeks' time against a backdrop of soaring global interest rates to tackle spiralling inflation that is designed to cool demand and slow the world economy.

Mr Chalmers said his fiscal blueprint will aim to provide relief to households from inflation and to invest in supply chains and skills training to help ease price pressures. He said the government would seek to do so without adding further demand to the economy.

"We want to make sure that cost of living support that we provide doesn't make the already hard job of the independent Reserve Bank even harder," he said. "We're very conscious of that."

The Reserve Bank of Australia (RBA) this month slowed its pace of policy tightening, hiking by a quarter percentage point after four consecutive half-point increases. That contrasts with the United States, which has delivered three straight 75 basis-point hikes.

The rate differential between the RBA and the US Federal Reserve is among reasons for a weakening of the Australian dollar, Mr Chalmers said.

The currency has fallen 17 per cent since early April and is currently trading below 63 US cents.

That depreciation boosts the cost of imports "and that has implications for inflation", the treasurer said. BLOOMBERG