In her first public address since the introduction of sweeping tariffs on most goods entering the US, RBA governor Michele Bullock predicted “a period of uncertainty and adjustment as countries respond”.
“It will take some time to see how all of this plays out and the added unpredictability means we need to be patient as we work through how all of this could affect demand and supply globally,” she said at last night’s Chief Executive Women annual dinner in Melbourne.
Trump’s initial “reciprocal” tariff announcement, which targeted dozens of countries, including US allies, with import taxes as high as 49 per cent, sent stocks plunging worldwide and had Australian banks certain of an interest rate cut at the next RBA meeting in May.
But that 100 per cent expectation of a decrease softened yesterday to 73 per cent on the back of the president’s decision to pause the extra charges for 90 days, while targeting China with 125 per cent tariffs. Other countries such as Australia would still face a 10 per cent so-called “baseline” tariff on goods sent to the US in the interim.
But Bullock was making no such commitments last night, saying the bank was closely watching domestic and financial markets, along with how Australian families and businesses reacted.
“We are mindful of not adding to the uncertainty, and to that end, it’s too early for us to determine what the path will be for interest rates,” she said. “Our focus remains on our dual mandate for price stability and full employment.”
But she had a note of positivity for those making comparisons to the economic devastation of the global financial crisis.
The full list of Trump’s ‘reciprocal’ tariffs
“Financial market and economic volatility can be expected as this process unfolds. But there are two points I want to make on this,” she said.
“First, we’re not currently seeing the same degree of impact as previous market events like in 2008 for example.
“And second, the Australian financial system is strong and well placed to absorb shocks from abroad.”
“It’s a really good opportunity for us to confer with, compare notes with and coordinate our efforts with the regulators and others involved in the market right now,” he said ahead of the meeting.
“We are confident that we can weather these global conditions, but we’re not complacent.”
