RBA warns Donald Trump’s promised China tariffs would have an “adverse effect” on Australia

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RBA warns Donald Trump’s promised China tariffs would have an “adverse effect” on Australia

The Reserve Bank claims there could be an “adverse effect” on Australia if incoming US President Donald Trump were to impose his promised high tariff on China.During senate estimates on Wednesday, RBA assistant governor Christopher Kent said it was a “big concern“ whether Mr Trump imposes levies of up to 60 per cent on ******** imports, however he said the full-effect was still unclear.

“The big concern is large tariffs on China, which may have an adverse effect on us,” he said.

“So is it right to characterise the RBA position as of this morning as unclear in terms of what the ******* States election outcome means for inflation outlooks.”

Speaking more broadly, he said Mr Trump’s promised tariffs would likely ”push up” the US dollar and create less demand by the US for goods produced in other markets.

“But it means less demand by the US for global goods, so that’s sort of a negative for growth elsewhere,” he said.

While RBA governor Michelle Bullock confirmed the central bank has conducted modelling and analysis on how a Trump presidency will affect inflation and the cash rate domestically, she stated multiple times that it was too early to discern firm forecasts.

“We have a broad understanding of the way some of these policies, if they are implemented, will work out, but we haven’t done very explicit scenario analysis,” she said.

“There’s things going in all sorts of directions here. It might be inflationary in some ways, but it might be deflationary.”

However she acknowledged that as Australia’s largest trading partner, “ if China ends up badly affected by this … that badly affects us”.

“So it’s not easy to dissect what’s going to happen with all of this, particularly as well, we don’t know what’s going to happen.”

Camera IconThe central bank has said if incoming US President Donald Trump were to impose his promised tariff on China, there could be big consequences for Australia. NewsWire/ Nikki Short Credit: News Corp Australia

Bullock backs government spending

Ms Bullock also backed the government’s cost-of-living policies, stating that while they’ve added to spending, it hasn’t necessarily added to inflation.

“I would just say that I think the attitude at the moment that I am hearing from the government is the right one,” she told the committee.

“They’re conscious that they’ve got to have fiscal policy working for the *********** people, but they’re also conscious that they’ve got to use it in a way that doesn’t exacerbate the inflation problem.

“The government knows, as we know, as the *********** population knows that inflation is the thing that’s hurting everyone and if we don’t get inflation under control, then it’s worse for everyone.”

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