Global dislocation: trade uncertainty threatens | Australian Markets

Australians are being warned to brace for financial turbulence, as Donald Trump’s trade tariffs threaten to hazard the nation’s “soft landing” from high inflation.

Treasurer Jim Chalmers has offered his starkest warning about impending headwinds, citing “extreme” international uncertainty that would convey financial shocks within the near-term.

Treasury Secretary Steven Kennedy briefed Dr Chalmers on May 4 – the morning after Labor’s election victory – and mentioned the worldwide economic system had deteriorated because the US president introduced his tariffs.

Not even Australia’s pretty sturdy fundamentals would stop it being affected, he instructed the treasurer.

The uncertainty may convey a decline in investment, weak labour markets, much less family spending and more precautionary financial savings behaviour.

Dr Chalmers mentioned Australia was getting into “a period of global dislocation not seen since World War II”.

“Our people are still under pressure and the headwinds in the global economy are picking up at a rate of knots,” he mentioned.

“As we start this second term, we are staring down an intensifying global trade war, a real risk of recession in the world’s biggest economy, inflation much higher than Australia’s in most of the OECD and extreme global uncertainty and volatility.”

The uncertainty is being pushed by the US, after Mr Trump imposed giant tariffs on international imports, together with Australia, sparking threats of retaliation.

The unpredictable manner the Trump administration is managing its punitive tariffs regime has sparked warnings from main American investment banks about a US and subsequent international recession.

Wages and labour pressure knowledge to be launched this week would possibly information the Reserve Bank of Australia’s subsequent rate of interest resolution on May 20.

Economists broadly predict the RBA will chop one other 0.25 per cent off the money price, having introduced its first cut in more than 4 years in February.

Data launched on April 30 revealed Australia’s headline inflation was at 2.4 per cent within the 12 months to March, down from as high as 7.8 per cent in December 2022.

Dr Chalmers has usually referred to Australia’s “soft landing” from these heights, pointing to the elevated actual wages and low unemployment achieved concurrently to reducing inflation.

“This is an enviable position for our economy to be in – unique when we look around the world and compare ourselves to history, and defying the economic orthodoxy,” he mentioned.

“We know the job isn’t finished and we know we will be faced with more global economic volatility and unpredictability over the next three years, not less … it’s one of the reasons why Australians voted so emphatically for stability in uncertain times.”