Jim Chalmers faces a world of hard choices where the solution to one problem makes the other worse

High inflation, low growth and rising unemployment can be added to the federal treasurer’s wall of worries

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Jim Chalmers in a speech last week offered the scant encouragement that the economy would be “a bit better” in a year’s time.

Fast forward to Friday morning, and the treasurer revealed that his officials were busy downgrading their forecasts ahead of December’s mid-year budget update to show slower growth and higher unemployment.

In other words, things are getting worse, not better.

Overnight, a broadening Middle East conflict pushed the global benchmark oil price to US$113, and within sight of its April high of nearly US$120.

Motorists are paying 60 cents more for a litre of petrol prices than they were before the US and Israel attacked Iran. That’s an extra $36 to fill up a 60-litre tank. Do that once a week and a family’s monthly fuel bill is $144 higher than in February.

The New York Times overnight reported that the US and Israel have drawn up plans to restart attacks on Iran after the upcoming American midterm elections.

Westpac analysts have sketched out an “escalation” scenario for the Middle East conflict where oil climbs towards US$150, echoing warnings from the International Monetary Fund earlier this month.

That worst-case scenario would have huge implications for inflation and interest rates, even as we brace for a potential fifth interest rate hike on 3 November.

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Meanwhile, the one bright spot that has helped paper over many of the cracks in the global economy – the huge spending associated with artificial intelligence – has hit some serious wobbles.

Investors are worried about the huge surge in debt among companies racing to build the infrastructure for an AI future – the trigger for another steep sell-off on Wall Street overnight.

Community opposition to the massive datacentre build-out could stall the headlong rush towards an AI future. That is likely a good thing in the longer term, but in the short term is another stress to add to the wall of worries. Rising chatter of a new tech stock bubble is naturally accompanied by talk of an imminent bust.

With all this going on, no wonder that the treasurer can only offer the thinnest of gruel for Australians hungry for any evidence of an end to years of disruption, and of wages that can’t keep up with high and rising prices.

High inflation, low growth and rising unemployment is a central banker’s “nightmare”, as the Reserve Bank’s Andrew Hauser has said.

It’s also a nightmare for a federal treasurer who is increasingly unpopular and desperate for a win in the court of public opinion.

“The pressures on people right now are very substantial and obviously that keeps me awake at night,” Chalmers told Politico.