Treasurer Jim Chalmers warned that global economic pressures are intensifying but maintained that Australia will avoid a recession as the government prepares to trim the budget. He argued that external conflicts and private market activity are driving cost increases, while the federal government focuses on finding savings ahead of a mid-year fiscal update in December.

Price growth has accelerated to 4% in the year to August, up from 3.5%. The Reserve Bank responded by raising its key interest rate to 4.6%, the highest level since 2011. The central bank's move reflects broader struggles to cool an economy facing multiple headwinds.

Chalmers pointed to an eight-month war against Iran and restricted oil supplies as major drivers of inflation. He also shifted responsibility to the private sector, which he said accounts for the majority of economic activity. “For every $5 of demand in our economy, $1 is public, $4 is private,” he said. The treasurer stressed that government spending settings are not the main force behind rising prices.

The administration is working on additional budget cuts following $44.9bn in reductions identified over four years in May. Chalmers cautioned that further spending reductions would damage essential public services. He challenged critics to identify which government programs should be scaled back instead.

Opposition figures quickly criticized the treasurer's economic management. Shadow Treasurer Tim Wilson called for Chalmers to step down, arguing that current policies have fueled inflation to boost tax revenue. Assistant Science and Digital Technology Minister Andrew Charlton warned that avoiding a downturn remains a top priority for the ruling Labor government. “If you have a recession, you throw hundreds of thousands of people on to the unemployment queues, and that pulls a huge amount of demand out of the economy,” Charlton said.

Chalmers will travel to Japan next to meet with business leaders and the finance minister. The trip aims to attract foreign investment and secure long-term fuel supplies as the government navigates the shifting global landscape.