Australian Treasurer Jim Chalmers is preparing to release a mid-year budget update that projects a cooling economy, characterized by slower growth and an increase in the unemployment rate. In a speech delivered on Friday, Chalmers noted that the combination of high inflation and restrictive monetary policy is beginning to impact domestic activity and the labor market.

These projections align with recent signals from the Reserve Bank of Australia, where senior officials have indicated that further interest rate increases remain a possibility to address inflationary pressures. The Treasurer’s comments serve as a formal acknowledgment that the economic environment is becoming more challenging for households and businesses alike. While the Treasury is currently finalizing the revised figures, the narrative from the government emphasizes that the economy is facing a difficult six-month period. Economists cited in the report corroborate this outlook, suggesting that the current tightening cycle is effectively slowing down the labor market as intended by central bank policy.