Australians to save more as they fret over Trump tariffs
Donald Trump's tariff war will likely lead Australian businesses and households to save more and spend less, the Reserve Bank's chief economist has warned amid signs the US economy is struggling under the president's trade agenda.
Sarah Hunter, in an address to the Economic Society of Australia's Queensland branch in Brisbane on Tuesday afternoon, said that so far-reaching was Trump's tariff plan that it could alter the structure of the global economy.
The Reserve Bank cut official interest rates late last month, in part because of its own analysis showing a ramp-up in tariffs could push Australia into recession and push up to 200,000 people out of work.
Hunter said part of the problem caused by the tariffs – the latest being Trump saying he would double steel and aluminium tariffs to 50 per cent – was the amount of uncertainty they caused to consumers, businesses and affected governments.
That uncertainty had economic ramifications that would weigh on the Australian economy.
'Greater uncertainty about the future can lead households and businesses to save instead of spending and investing, and this is likely to be the case for Australian households and businesses too,' she said.
'And increased borrowing costs and risk premia in global financial markets are likely to spill into domestic markets, further weighing on activity.
'Global uncertainty may weigh substantially on domestic activity if uncertainty remains elevated.'
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