Australian inflation faces uncertainty amid Trump’s proposed tariffs

Australian inflation may be affected by President-elect Donald Trump’s proposed tariffs, but the impact is uncertain. The Reserve Bank is prepared to respond accordingly, said Deputy Governor Andrew Hauser.

Higher global tariffs could indirectly affect Australian demand by slowing down supply chains. Various factors, such as currency fluctuations and fiscal policies in affected countries, make the outcome unpredictable.

Hauser emphasised the need to avoid jumping to conclusions about the impact of tariffs on policy. The RBA will closely monitor developments and be prepared to respond accordingly based on emerging facts.

The RBA’s deputy highlighted Australia’s resilience to global economic uncertainties, citing limited exposure to US tariffs, strong comparative advantages, and the ability to adapt trade relationships. Australia’s flexible exchange rate and independent monetary policy were also noted as key factors.

The deputy governor pointed out that Australia’s trade is heavily reliant on China, with over 80 per cent of iron ore exports going to China, which represents three-quarters of global iron ore imports.

Hauser pointed out that Australia may be more vulnerable to a global trade war than current data indicates if China faces harsh tariffs or if countries reduce trade with distant geopolitical partners.

Attribution: Bloomberg

Subediting: M. S. Salama