The international economics of Australia’s budget are pervaded by a Voldemort-like figure.
The He-Who-Must-Not-Be-Named is Donald Trump, firing up trade wars, churning global finance and smashing the rules-based order.
The closest the budget papers come to hinting at Voldemort are two references to the ‘US administration’.
Last year, Treasurer Jim Chalmers worried about a ‘fraught and fragile’ world. This year, the anxiety is realised; what was fragile is in pieces. Chalmers mourned a ‘volatile and unpredictable’ global economy, telling parliament: ‘The 2020s have already seen a global pandemic, global inflation and the threat of a global trade war. The whole world has changed as a consequence.’
Surveying that changed world, the budget papers predict global growth will stay subdued for the next three years, because of ‘considerable uncertainty’ (hi, Voldemort). Treasury’s three-year estimate of global growth is 3.75 percent, ‘the longest stretch of below-average growth since the early 1990s’.
In the budget, Treasury estimates the effect of the United States imposing a 25 percent tariff on all imports of durable manufacturing goods, such as steel and aluminium. While the tariff may lead to ‘a reduction in the real GDP of Australia, China and the United States over time’, the total effect of the tariffs on Australia’s economy by 2030 is ‘modest’. The indirect effect of the tariffs is nearly four times as large as the direct effect, reflecting the importance of trade flows between Australia, China and the US.
Inflation in the US would persistently increase as imports become more expensive, Treasury notes, while Australia would see ‘a small temporary increase in inflation’ because of depreciation of the Australian dollar. Model in retaliatory 25 percent tariffs by all countries, including China and Australia, and ‘the loss in real GDP is amplified’.
Treasury lists the factors pushing against China: immediate pressure from its property downturn, trade conflict with the US and ‘longer term, structural challenges, including a shrinking workforce and lower productivity growth’. While China grew by 5 percent last year, the forecast for this year is 4.75 percent, falling to 4.25 percent by 2027.
Japan’s growth is expected to be around 1.25 percent this year, then lower in 2026 and 2027. India is expected to keep powering on at more than six percent over 2025–27, driven by ‘robustness in domestic consumption, increased government spending, easing of monetary policy, and an expansion of the manufacturing sector’.
Beyond China, East Asia is forecast to grow by 4 percent over 2025–27, with domestic demand in key economies bolstered by an easing of monetary policy. ‘However, escalating trade tensions could dampen investor confidence and weigh on growth.’
The Voldemort effect on Australia’s discussion of geoeconomics is the same on geopolitics. What Canberra thinks of Trump versus what Canberra publishes about the administration is the difference between night and day.
To give you a hint of Canberra’s dark reality, consider US international relations professor, Daniel Drezner. His writing on US foreign policy is always measured and carefully judged, but on Australia’s budget day he published an article titled: ‘American Foreign Policy Is Being Run by the Dumbest Motherfuckers Alive’.
Canberra shares the horror, even if it’d use more Australian-flavoured swearwords. The contortions this forces on policy statements is on display in Australia in the World – 2025 Snapshot, issued by the Department of Foreign Affairs and Trade.
Foreign Minister Penny Wong’s foreword observes: ‘Australians face confronting signs that assumptions we have relied on for generations are less assured, with international security increasingly fragile. We live in a world of increasing strategic surprise—ever more uncertain and unpredictable.’
Any global scene-setter from an Australian foreign minister during the past 80 years would have had the US at its heart. Not this foreword. Perhaps there’s a Voldemort sighting in Wong’s lament: ‘Authoritarianism is spreading. Some countries are shifting alignment … Institutions we built are being eroded, and rules we wrote are being challenged.’
The text of the document drops the coyness to judge: ‘President Trump’s America First agenda envisages a different role for the United States in the world.’
The Trump reality is balanced by the paper’s traditional statement of what the US has been: ‘The United States of America is our closest ally, principal strategic partner and largest two-way investment partner. The Indo-Pacific would not have enjoyed its long, uninterrupted period of stability and prosperity without the United States and the security it provides, and it remains critical to a favourable balance in our region.’
Working for that balance, the DFAT strategy is to ‘prioritise region, relationships and rules’, focus on the Indo-Pacific and seek ‘unprecedented’ partnerships in the South Pacific while ‘turbocharging our economic ties with Southeast Asia’.
