Treasury downgrades global growth expectations amid uncertainty
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The news: The Treasury has downgraded its growth forecasts for major economies around the world, ahead of the Budget, amid higher interest rates and rising volatility.
The numbers: Treasury now expects China's growth to be 0.25 percentage points lower in 2025 at 4.25%, a growth rate that will remain for another two years.
The UK's economy has also been downgraded by 0.5 percentage points to 1.25% in 2025, prompted by cost of living pressures and a slump in exports following Brexit. Japan’s growth has been revised 0.25 percentage points lower to just 0.75% in 2024 after weaker than expected consumption.
The context: The Treasury’s downgrades reflect tighter monetary conditions in many of these economies and the uncertainty created by the escalation in global volatility, including heightened tensions in the Middle East, and the repercussions of the challenges in China’s economy.
Treasurer Jim Chalmers, who has been meeting with G20 counterparts in Washington, said global uncertainty had led to the revised expectations. Further revisions on growth forecasts are expected following the release of US GDP figures on Thursday, as well as similar data for the EU later in May.
What they said: "The fraught and fragile global outlook was a big feature of discussions in Washington DC and will be a big factor as we put the finishing touches on the budget," Jim Chalmers said in a statement. "Given the global challenges coming at us, the May budget will put a premium on responsibility and a emphasis on security".
The source: Australian Treasury
