Australian Treasurer Jim Chalmers has attributed the global stock market downturns to “bad decisions” regarding tariffs, although his department anticipates only minimal effects on Australia’s domestic economic growth and inflation. During an address in Sydney on Monday, Chalmers commented on the market’s expectations that the Reserve Bank of Australia (RBA) would expedite interest rate cuts due to the uncertainty from President Donald Trump’s tariffs. He mentioned having discussions with RBA Governor Michele Bullock prior to the stock market opening to exchange views on potential economic repercussions from the tariffs.
Financial markets are currently predicting four rate cuts by the RBA, starting in May, with a 67% likelihood of an additional cut later in the year. The May meeting is expected to possibly include a half percentage-point rate reduction.
The Treasurer aimed to reassure voters that the Australian economy is in a strong position to manage global economic challenges. Australia is scheduled to hold a national election on May 3.
“We are witnessing the effects of several misguided tariff decisions globally,” Chalmers stated to the press. “However, we are better positioned and better prepared, and Australians should feel assured by this.”
Chalmers’ remarks followed the release of the Australian Treasury’s Pre-Election Economic and Fiscal Outlook (PEFO), which projected slightly wider budget deficits both for the current fiscal year and through June 2025. The Treasury noted an unusually high level of forecast uncertainty due to the tariff announcements.
The PEFO is required to be published within ten days of an election call, despite a budget being released by the center-left government on March 25.
“The tariff increases announced recently have been more significant than anticipated,” the Treasury stated. “The potential scale and persistence of the economic impact of these announcements have resulted in more-than-usual uncertainty regarding the outlook.”
On Monday, a sell-off in global equities intensified as investors sought safe-haven assets following China’s announcement of retaliatory measures. Concerns are growing that the policy moves aimed at revising global trade in favor of the United States could heighten recession risks.
Alongside the PEFO, the Treasury provided an analysis of the impact of Trump’s tariffs on Australia, noting a 10% tariff on Australian exports to the U.S. According to modeling commissioned by Chalmers after Trump’s announcement, Australia’s real GDP is expected to decrease by only 0.1% due to the tariffs, with a modest increase of 0.2% in short-term inflation.
Nevertheless, the Treasury cautioned that the effects would be unevenly distributed, with industries reliant on trade, such as agriculture, energy, and mining, being most affected. It also remarked that most of Australia’s tariff exposure stems from its East Asian trading partners rather than direct exports to the U.S., with the possibility of nations like China turning to Australia for imports, which could lead to minor economic gains.
