As Treasurer Jim Chalmers warned on Tuesday, Australia could soon be hit by a global economic slowdown which will only compound the negative impact of the RBA rate increases. “The weight of opinion around the world is that the global situation has gotten much worse, even in the last few weeks,” Chalmers said.

China’s economic growth is slowing because of its bursting property bubble and its zero-COVID policy, the loss of Russian gas is expected to cause a recession in Europe and the US economy is likely to shudder to a halt because the inflation-obsessed Federal Reserve has raised rates even faster than here.

The RBA has admitted its forecasters missed the jump in inflation during the recovery from the pandemic. It must now make sure it does not miss a possible downturn.

The federal government has a big part to play in keeping the economy on track by handing down a responsible budget on October 25 which does not add unnecessarily to inflationary pressure with unfunded spending.

It should take note of the debacle in Britain where the government was punished for a reckless, populist budget. New prime minister Liz Truss had to reverse huge tax cuts for higher-income earners which the country could not afford.

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Chalmers should make the RBA’s job easier by cutting wasteful spending that is adding to demand and hence pushing up inflation. He has taken a step in the right direction by allowing the petrol levy to return to its normal level from October 1 after the expiry of the cut announced in the March budget.

Barring unforeseen shocks, Australia should be well placed to achieve the mythical “economic soft landing” from the current bout of inflation where price rises ease without the need for interest rates so high that the economy goes backward. To paraphrase then treasurer Paul Keating’s words after he got the mix of policies wrong in a somewhat similar situation in 1990, this is not a recession that we have to have.

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