Latest news with #EconomicSocietyofAustralia
Yahoo
3 days ago
- Business
- Yahoo
Surprising Aussie benefit of Trump trade
Aussies households are tipped to slow their spending on the back of US President Donald Trump's tariff policy even though they will likely benefit from cheaper goods and it helped deliver a rate cut in May. In a speech made at the Economic Society of Australia Business Lunch, RBA assistant governor Sarah Hunter said Australia was one of the countries that could benefit from cheaper goods in the short term as weakening growth outweighs rising costs for businesses. 'Overall weaker global growth would put near-term downward pressure on the prices of globally traded goods,' she said. 'For countries that are not imposing higher tariffs, such as Australia, this could flow into import prices, making products cheaper and lowering inflation.' But the Trump tariffs are unlikely to lift anaemic household spending, with Australians tipped to moderate their purchases, while business investment is tipped to stall. '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,' Ms Hunter said. 'Though the magnitude of these effects is itself very uncertain, this does suggest that global uncertainty may weigh substantially on domestic activity if uncertainty remains elevated.' Ms Hunter said there were various forecasts the RBA had made surrounding the global environment, with the base case showing slower economic growth in Australia, a slightly weaker labour market and the price of tradeable goods to dampen. 'Together, these two outcomes mean that inflation is forecast to be a little lower than the February statement of monetary policy, settling around the midpoint of 2 to 3 per cent target range,' she said. Ms Hunter said the overall economic uncertainty on the back of the Trump policies also added to the 25 basis point rate cut in May. 'These were provided to the Monetary Policy Board to help inform their decision-making; taking all the information into account and considering the risks to the outlook, they decided to cut the cash rate by 25 basis points,' she said. Going forward, Ms Hunter said the central bank would continue to watch the data. Mr Trump announced on April 2 a global tariff policy on just about every trading partner on the basis of 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 majority of his tariff policy for 90 days due to the damage that was being done to his own economy and money markets. He also faced a challenge in the federal courts over his use of power. Sector-specific tariffs such as the 50 per cent on steel and aluminium imports to the US and a 30 per cent 'reciprocal tariff' on China are still in effect.
The Advertiser
3 days ago
- Business
- The Advertiser
RBA hints at more interest rate cuts if tariffs worsen
Minutes from the last Reserve Bank board meeting reveal why they came close to an unusually large cut, as the bank's chief economist outlines how they think Donald Trump's tariffs could hit the domestic economy. The minutes from the bank's May meeting were released on Tuesday, shedding light on its decision to cut the cash rate by 25 basis points to 3.85 per cent. The Reserve Bank considered an even larger reduction of 50 basis points at the meeting, due to uncertainty in global markets. Bank board members said developments in the domestic economy alone, with slowing inflation and weak consumption growth, warranted a 25 basis point cut. Repercussions from tariffs imposed by the US had reinforced the need to cut interest rates. "The rise in global tariffs and increase in policy uncertainty had adversely changed the outlook for growth in Australia's major trading partners," the minutes said. However, a 0.25 per cent cut was agreed upon as being the most appropriate, given there were still risks inflation could kick off again. The board said if global uncertainty weighed heavier than expected, interest rates would need to be cut even more than forecast. "Monetary policy would need to move to an expansionary setting in the event these scenarios materialised," the minutes said. The rates market has forecast the cash rate to drop to 3.1 per cent by the end of the year. However, the central bank said it was not yet time to make a decision on whether a more aggressive approach to cutting interest rates was needed, with board members expressing a preference to "move cautiously and predictably". In a speech to the Economic Society of Australia in Brisbane, RBA chief economist Sarah Hunter outlined some of the bank's thoughts on how Mr Trump's tariffs would impact the domestic economy. She said the bank had identified the key transmission channels that would impact the Australian economy and determine the board's future monetary policy response. Firstly, trade flows would be impacted. That could push down inflation in Australia as countries divert cheap goods from countries with tariff barriers. But a broader disruption to supply chains could also result in prices rising. The tariffs will also weigh on economic growth, as uncertainty causes businesses and to a lesser extent households to delay spending decisions. Much will depend, though, on which direction US authorities go from here. Markets have been supported by their assumption that Trump Always Chickens Out. If the US president lashes out to disprove this theory, markets could be in for a drastic re-pricing, which could further impact households' and businesses' decision-making. How the rest of the world responds will also affect the economic fallout. Governments could provide fiscal support to boost ailing economies, with much hinging on the response of the Chinese administration, given the nation's outsized influence on Australian trade. Central banks, including the RBA, will also have a role to play in dampening the economic shock through easing interest rates. "So how will the current unpredictable and uncertain global environment transmit through to the Australian economy? The short answer is we can't be completely sure," Ms Hunter said. The RBA will continue to monitor all these factors and adjust the assumptions that drive its monetary policy decision-making accordingly, she said. How Australia's economy stacks up against other allies will be revealed when the OECD releases its global economic outlook on Tuesday. The outlook comes a day before the release of data on the domestic economy's performance in the first three months of 2025. Economists tip Wednesday's gross domestic product numbers for the March quarter will show the economy expanded by up to 0.5 per cent. Minutes from the last Reserve Bank board meeting reveal why they came close to an unusually large cut, as the bank's chief economist outlines how they think Donald Trump's tariffs could hit the domestic economy. The minutes from the bank's May meeting were released on Tuesday, shedding light on its decision to cut the cash rate by 25 basis points to 3.85 per cent. The Reserve Bank considered an even larger reduction of 50 basis points at the meeting, due to uncertainty in global markets. Bank board members said developments in the domestic economy alone, with slowing inflation and weak consumption growth, warranted a 25 basis point cut. Repercussions from tariffs imposed by the US had reinforced the need to cut interest rates. "The rise in global tariffs and increase in policy uncertainty had adversely changed the outlook for growth in Australia's major trading partners," the minutes said. However, a 0.25 per cent cut was agreed upon as being the most appropriate, given there were still risks inflation could kick off again. The board said if global uncertainty weighed heavier than expected, interest rates would need to be cut even more than forecast. "Monetary policy would need to move to an expansionary setting in the event these scenarios materialised," the minutes said. The rates market has forecast the cash rate to drop to 3.1 per cent by the end of the year. However, the central bank said it was not yet time to make a decision on whether a more aggressive approach to cutting interest rates was needed, with board members expressing a preference to "move cautiously and predictably". In a speech to the Economic Society of Australia in Brisbane, RBA chief economist Sarah Hunter outlined some of the bank's thoughts on how Mr Trump's tariffs would impact the domestic economy. She said the bank had identified the key transmission channels that would impact the Australian economy and determine the board's future monetary policy response. Firstly, trade flows would be impacted. That could push down inflation in Australia as countries divert cheap goods from countries with tariff barriers. But a broader disruption to supply chains could also result in prices rising. The tariffs will also weigh on economic growth, as uncertainty causes businesses and to a lesser extent households to delay spending decisions. Much will depend, though, on which direction US authorities go from here. Markets have been supported by their assumption that Trump Always Chickens Out. If the US president lashes out to disprove this theory, markets could be in for a drastic re-pricing, which could further impact households' and businesses' decision-making. How the rest of the world responds will also affect the economic fallout. Governments could provide fiscal support to boost ailing economies, with much hinging on the response of the Chinese administration, given the nation's outsized influence on Australian trade. Central banks, including the RBA, will also have a role to play in dampening the economic shock through easing interest rates. "So how will the current unpredictable and uncertain global environment transmit through to the Australian economy? The short answer is we can't be completely sure," Ms Hunter said. The RBA will continue to monitor all these factors and adjust the assumptions that drive its monetary policy decision-making accordingly, she said. How Australia's economy stacks up against other allies will be revealed when the OECD releases its global economic outlook on Tuesday. The outlook comes a day before the release of data on the domestic economy's performance in the first three months of 2025. Economists tip Wednesday's gross domestic product numbers for the March quarter will show the economy expanded by up to 0.5 per cent. Minutes from the last Reserve Bank board meeting reveal why they came close to an unusually large cut, as the bank's chief economist outlines how they think Donald Trump's tariffs could hit the domestic economy. The minutes from the bank's May meeting were released on Tuesday, shedding light on its decision to cut the cash rate by 25 basis points to 3.85 per cent. The Reserve Bank considered an even larger reduction of 50 basis points at the meeting, due to uncertainty in global markets. Bank board members said developments in the domestic economy alone, with slowing inflation and weak consumption growth, warranted a 25 basis point cut. Repercussions from tariffs imposed by the US had reinforced the need to cut interest rates. "The rise in global tariffs and increase in policy uncertainty had adversely changed the outlook for growth in Australia's major trading partners," the minutes said. However, a 0.25 per cent cut was agreed upon as being the most appropriate, given there were still risks inflation could kick off again. The board said if global uncertainty weighed heavier than expected, interest rates would need to be cut even more than forecast. "Monetary policy would need to move to an expansionary setting in the event these scenarios materialised," the minutes said. The rates market has forecast the cash rate to drop to 3.1 per cent by the end of the year. However, the central bank said it was not yet time to make a decision on whether a more aggressive approach to cutting interest rates was needed, with board members expressing a preference to "move cautiously and predictably". In a speech to the Economic Society of Australia in Brisbane, RBA chief economist Sarah Hunter outlined some of the bank's thoughts on how Mr Trump's tariffs would impact the domestic economy. She said the bank had identified the key transmission channels that would impact the Australian economy and determine the board's future monetary policy response. Firstly, trade flows would be impacted. That could push down inflation in Australia as countries divert cheap goods from countries with tariff barriers. But a broader disruption to supply chains could also result in prices rising. The tariffs will also weigh on economic growth, as uncertainty causes businesses and to a lesser extent households to delay spending decisions. Much will depend, though, on which direction US authorities go from here. Markets have been supported by their assumption that Trump Always Chickens Out. If the US president lashes out to disprove this theory, markets could be in for a drastic re-pricing, which could further impact households' and businesses' decision-making. How the rest of the world responds will also affect the economic fallout. Governments could provide fiscal support to boost ailing economies, with much hinging on the response of the Chinese administration, given the nation's outsized influence on Australian trade. Central banks, including the RBA, will also have a role to play in dampening the economic shock through easing interest rates. "So how will the current unpredictable and uncertain global environment transmit through to the Australian economy? The short answer is we can't be completely sure," Ms Hunter said. The RBA will continue to monitor all these factors and adjust the assumptions that drive its monetary policy decision-making accordingly, she said. How Australia's economy stacks up against other allies will be revealed when the OECD releases its global economic outlook on Tuesday. The outlook comes a day before the release of data on the domestic economy's performance in the first three months of 2025. Economists tip Wednesday's gross domestic product numbers for the March quarter will show the economy expanded by up to 0.5 per cent. Minutes from the last Reserve Bank board meeting reveal why they came close to an unusually large cut, as the bank's chief economist outlines how they think Donald Trump's tariffs could hit the domestic economy. The minutes from the bank's May meeting were released on Tuesday, shedding light on its decision to cut the cash rate by 25 basis points to 3.85 per cent. The Reserve Bank considered an even larger reduction of 50 basis points at the meeting, due to uncertainty in global markets. Bank board members said developments in the domestic economy alone, with slowing inflation and weak consumption growth, warranted a 25 basis point cut. Repercussions from tariffs imposed by the US had reinforced the need to cut interest rates. "The rise in global tariffs and increase in policy uncertainty had adversely changed the outlook for growth in Australia's major trading partners," the minutes said. However, a 0.25 per cent cut was agreed upon as being the most appropriate, given there were still risks inflation could kick off again. The board said if global uncertainty weighed heavier than expected, interest rates would need to be cut even more than forecast. "Monetary policy would need to move to an expansionary setting in the event these scenarios materialised," the minutes said. The rates market has forecast the cash rate to drop to 3.1 per cent by the end of the year. However, the central bank said it was not yet time to make a decision on whether a more aggressive approach to cutting interest rates was needed, with board members expressing a preference to "move cautiously and predictably". In a speech to the Economic Society of Australia in Brisbane, RBA chief economist Sarah Hunter outlined some of the bank's thoughts on how Mr Trump's tariffs would impact the domestic economy. She said the bank had identified the key transmission channels that would impact the Australian economy and determine the board's future monetary policy response. Firstly, trade flows would be impacted. That could push down inflation in Australia as countries divert cheap goods from countries with tariff barriers. But a broader disruption to supply chains could also result in prices rising. The tariffs will also weigh on economic growth, as uncertainty causes businesses and to a lesser extent households to delay spending decisions. Much will depend, though, on which direction US authorities go from here. Markets have been supported by their assumption that Trump Always Chickens Out. If the US president lashes out to disprove this theory, markets could be in for a drastic re-pricing, which could further impact households' and businesses' decision-making. How the rest of the world responds will also affect the economic fallout. Governments could provide fiscal support to boost ailing economies, with much hinging on the response of the Chinese administration, given the nation's outsized influence on Australian trade. Central banks, including the RBA, will also have a role to play in dampening the economic shock through easing interest rates. "So how will the current unpredictable and uncertain global environment transmit through to the Australian economy? The short answer is we can't be completely sure," Ms Hunter said. The RBA will continue to monitor all these factors and adjust the assumptions that drive its monetary policy decision-making accordingly, she said. How Australia's economy stacks up against other allies will be revealed when the OECD releases its global economic outlook on Tuesday. The outlook comes a day before the release of data on the domestic economy's performance in the first three months of 2025. Economists tip Wednesday's gross domestic product numbers for the March quarter will show the economy expanded by up to 0.5 per cent.
Perth Now
3 days ago
- Business
- Perth Now
Surprising Aussie benefit of Trump trade
Aussies households are tipped to slow their spending on the back of US President Donald Trump's tariff policy even though they will likely benefit from cheaper goods and it helped deliver a rate cut in May. In a speech made at the Economic Society of Australia Business Lunch, RBA assistant governor Sarah Hunter said Australia was one of the countries that could benefit from cheaper goods in the short term as weakening growth outweighs rising costs for businesses. 'Overall weaker global growth would put near-term downward pressure on the prices of globally traded goods,' she said. 'For countries that are not imposing higher tariffs, such as Australia, this could flow into import prices, making products cheaper and lowering inflation.' But the Trump tariffs are unlikely to lift anaemic household spending, with Australians tipped to moderate their purchases, while business investment is tipped to stall. '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,' Ms Hunter said. 'Though the magnitude of these effects is itself very uncertain, this does suggest that global uncertainty may weigh substantially on domestic activity if uncertainty remains elevated.' Ms Hunter said there were various forecasts the RBA had made surrounding the global environment, with the base case showing slower economic growth in Australia, a slightly weaker labour market and the price of tradeable goods to dampen. Businesses and households are tipped to spend less. NewsWire / John Appleyard Credit: News Corp Australia 'Together, these two outcomes mean that inflation is forecast to be a little lower than the February statement of monetary policy, settling around the midpoint of 2 to 3 per cent target range,' she said. Ms Hunter said the overall economic uncertainty on the back of the Trump policies also added to the 25 basis point rate cut in May. 'These were provided to the Monetary Policy Board to help inform their decision-making; taking all the information into account and considering the risks to the outlook, they decided to cut the cash rate by 25 basis points,' she said. Going forward, Ms Hunter said the central bank would continue to watch the data. Mr Trump announced on April 2 a global tariff policy on just about every trading partner on the basis of 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 majority of his tariff policy for 90 days due to the damage that was being done to his own economy and money markets. He also faced a challenge in the federal courts over his use of power. Sector-specific tariffs such as the 50 per cent on steel and aluminium imports to the US and a 30 per cent 'reciprocal tariff' on China are still in effect.
West Australian
3 days ago
- Business
- West Australian
‘Downward pressure on prices': Silver lining in Trump trade
Aussies households are tipped to slow their spending on the back of US President Donald Trump's tariff policy even though they will likely benefit from cheaper goods and it helped deliver a rate cut in May. In a speech made at the Economic Society of Australia Business Lunch, RBA assistant governor Sarah Hunter said Australia was one of the countries that could benefit from cheaper goods in the short term as weakening growth outweighs rising costs for businesses. 'Overall weaker global growth would put near-term downward pressure on the prices of globally traded goods,' she said. 'For countries that are not imposing higher tariffs, such as Australia, this could flow into import prices, making products cheaper and lowering inflation.' But the Trump tariffs are unlikely to lift anaemic household spending, with Australians tipped to moderate their purchases, while business investment is tipped to stall. '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,' Ms Hunter said. 'Though the magnitude of these effects is itself very uncertain, this does suggest that global uncertainty may weigh substantially on domestic activity if uncertainty remains elevated.' Ms Hunter said there were various forecasts the RBA had made surrounding the global environment, with the base case showing slower economic growth in Australia, a slightly weaker labour market and the price of tradeable goods to dampen. 'Together, these two outcomes mean that inflation is forecast to be a little lower than the February statement of monetary policy, settling around the midpoint of 2 to 3 per cent target range,' she said. Ms Hunter said the overall economic uncertainty on the back of the Trump policies also added to the 25 basis point rate cut in May. 'These were provided to the Monetary Policy Board to help inform their decision-making; taking all the information into account and considering the risks to the outlook, they decided to cut the cash rate by 25 basis points,' she said. Going forward, Ms Hunter said the central bank would continue to watch the data. Mr Trump announced on April 2 a global tariff policy on just about every trading partner on the basis of 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 majority of his tariff policy for 90 days due to the damage that was being done to his own economy and money markets. He also faced a challenge in the federal courts over his use of power. Sector-specific tariffs such as the 50 per cent on steel and aluminium imports to the US and a 30 per cent 'reciprocal tariff' on China are still in effect.
The Age
3 days ago
- Business
- The Age
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.'
