Westpac chief economist Luci Ellis takes aim at Donald Trump's tariffs

News.com.au

21-05-2025

A big four bank chief economist has accused the White House of 'punching its own economy' in a wide-ranging speech on global growth.
In a speech at the Morningstar conference, Westpac chief economist Luci Ellis took aim at US President Donald Trump's tariff policy and its impact on the global economy.
'It will be a huge growth hit but not a full-blown recession,' she said.
'And that's working on the assumption that just, you know, Trump can stop punching the economy in the face anytime he likes,' she said.
Mr Trump announced on April 2 a global tariff policy on just about every trading partner on the basis on evening up the US trade deficit.
At a minimum, every country, including Australia, faced a 10 per cent tariff, while 'cheating' countries faced higher tariffs.
Mr Trump eventually paused the tariffs for 90 days due to the damage that was being done to his own economy and money markets.
Ms Ellis said the Australian example showed the US tariff policy would not work.
'As we know in Australia, you don't get rich behind a tariff wall,' she said.
'It actually is not the recipe for a competitive, innovative manufacturing sector. It's a recipe for people saying every time I find it hard to compete with imports, I'm going to go to the government and ask for more help.'
The economist also forecast that Australia would grow slowly on the back of China hitting its 5 per cent growth target, labelling Australia's economic growth as a 'bit disappointing', which is set to continue even with a rate cut.
According to Westpac, consumer growth will remain sluggish at 1.5 per cent, below the revised 1.9 per cent Reserve Bank target.
'Consumers have been really, really grumpy over the last few years because they've really been copping it in the neck,' Ms Ellis said.
'And while they are still gloomy, and they did take a little bit of a tumble in sentiment after liberation day, we can see that in the daily run of data, the survey was in the field that week, things are a little bit better than what they were two years ago.'
But in welcome news for households, Ms Ellis predicted there would be at least two more interest rate cuts that could help lift consumer spending.
'Obviously, the big news this week is the RBA doing what it needed to do and cutting rates by 25 basis points yesterday,' she said.
'That was what we predicted. That was what the market had priced in.
'We expect two more cuts this year. This has been our longstanding view, coming down to 3.35 per cent by year end, but there's is a chance they do more.'
Ms Ellis said Australia's big four drivers of the economy – iron ore, coal, liquefied natural gas and university education – were tapped out but believed there could be new drivers going forward.
'It may surprise you to know that Australia has a $7.5bn dollar export industry called software licensing,' she said.
'That's more than we export in copper metal, in aluminium, in barley or in rice.
'You probably didn't realise that.
'And then I'll mention Canva, Atlassian and WiseTech.
'And you add the two together, add the three together, and that's pretty much most of that 7½ billion.
'It only takes a few winners to suddenly have a whole new export industry.'