Jim Chalmers will warn Australia must focus on resilience over retaliation as the Trump administration overturns the rules that have governed the global economic order for the past four decades.
Chalmers will deliver a major economic address in Brisbane at lunchtime on Tuesday, a week ahead of a budget where the Albanese government will spruik its bona fides as a responsible fiscal manager while unveiling the first of what is expected to be a string of deficits into the 2030s.
The treasurer is not expected to reveal any major new spending promises in his fourth budget, as Labor holds fire ahead of the official start of the campaign for an election that must be held by mid-May.
Slamming the US president Donald Trump’s tariffs as “self-defeating and self-sabotaging”, Chalmers in his speech will point to fresh OECD warnings that the world economy will grow more slowly as a result of American trade aggression.
“In a world of retaliation and escalation, the impacts of tariffs are amplified. They linger for longer, resulting in a bigger reduction in GDP and a bigger increase in prices,” Chalmers will say.
“Our response to this will not be a race to the bottom on tariffs, because more and higher tariffs would harm, not help, our workers, businesses, industries and economy.”
The Paris-based OECD – a 38-member grouping of rich countries, including Australia – on Monday evening issued a more downbeat assessment of the global economy, laying the blame on Trump’s tariffs.
The OECD’s economists slashed their estimates for Australian real GDP growth from 2.5% in 2026 to 1.8% and well below the Reserve Bank’s forecast of 2.3%.
The same report warned the rise in protectionism would push consumer prices higher and could force central banks to start lifting interest rates to contain any inflationary resurgence – although the inflation outlook for Australia remained largely unchanged and even lower in 2026 as slower growth bites.
Despite recent improvements in growth, wages and inflation – alongside last month’s interest rate cut – the opposition believes its most effective attack on the Albanese government is asking Australians whether they are better off now than they were before the last election, while also painting Labor as fiscally reckless.
The shadow treasurer, Angus Taylor, on Monday repeated his charge that “this is the biggest-spending, biggest-taxing government in Australian history” and warned of even higher taxes under Labor.
As the major parties draw their rhetorical battlelines for the upcoming budget – one that was forced upon the government after ex-Tropical Cyclone Alfred swept away plans to call an April election – Chalmers says the intense storms and flooding in Queensland and northern New South Wales will deliver a $1.2bn hit to the economy.
The treasurer in his speech on Tuesday will frame the budget against a backdrop of escalating trade tensions and ongoing conflicts in Ukraine and the Middle East.
“It’s clear the rules that underpinned global economic engagement for more than 40 years are being rewritten,” Chalmers will say.
“The whole world has changed. We’ve seen that change accelerate since [Trump’s] inauguration day. Developments since then have not been surprising but they have been seismic. As a trading nation, Australia has a lot at stake.
“The decision not to exempt Australia from American tariffs on steel and aluminium was disappointing, unnecessary, senseless and wrong, as the PM rightly pointed out. We are not uniquely disadvantaged by these tariffs, but we deserve better as a long-term partner and ally.”
After delivering two straight surpluses, Chalmers has cautioned that Australians should expect the budget to drop back into the red. When questioned on Monday, the treasurer would only say the deficit “will be much, much smaller than what we inherited from our political opponents”.
The budget deficit in 2021-22 was $32bn, before Labor delivered surpluses of $22.1bn and $9.3bn in the next two financial years. December’s mid-year fiscal update estimated a deficit of $26.9bn for 2024-25, although economists anticipate it will be smaller.