As global trade tensions rise, Australia stands at a critical juncture regarding its economic policies, particularly in relation to tariffs. Recent discussions within the Treasury have revealed significant concerns about the direct impact of tariffs on both businesses and consumers. These tariffs not only raise prices for imported goods but also have the potential to push up broader price levels across the economy, ultimately hindering economic growth.
The political storm surrounding Treasury's costings has intensified. Angus Taylor, a prominent figure in the ongoing debate, has suggested that the public service was utilized inappropriately in this context. Treasury Secretary Steven Kennedy has voiced warnings against retaliatory measures in response to tariffs imposed by the Trump administration, emphasizing that any such actions could have detrimental effects on Australia’s economy.
Kennedy explained that if Australia were to impose tariffs, it would bear nearly all the associated costs. He elaborated on the modest impact tariffs would have, predicting a contraction in economic activity and an increase in inflation. The Treasury had previously modeled these effects, underscoring the potential adverse consequences of imposing tariffs.
"It is important that, should trade tensions escalate around the world, Australia's response is responsible, rigorous and effective, even if tariffs are applied to our exports."
— Steven Kennedy
Kennedy acknowledged the complexities Treasury faces when balancing government directives with its role as an independent advisor. He noted, “We are sometimes put in a challenging position.” He further cautioned against retaliatory tariffs, describing them as “an act of self-sabotage.”
In light of recent developments, concerns have emerged regarding the US President's strategies toward allies. Observers note that if he perceives success in pressuring European partners, he may adopt a similar approach in the Indo-Pacific region. This potential shift has raised alarms among Australian policymakers.
"If the US President thinks his tactics in squeezing allies has worked in Europe, he'll adopt a similar strategy in the Indo Pacific."
— (no attribution)
The Treasury's role in this landscape has come under scrutiny as senior staff members have transitioned between Labor and Liberal offices throughout their careers. Godwin Grech, a former Treasury official, has found himself at the center of controversy following revelations regarding his involvement in a bank bailout. Deborah O'Neill made headlines by unveiling emails that purportedly demonstrate Grech's connections to this initiative shortly before Peter Dutton purchased bank shares.
Moreover, Shane Johnson, Deputy Secretary of Treasury's macroeconomic division, has been drawn into a political fray, described as being used as a pawn in a broader attack on Treasury’s integrity. Johnson reflected on the situation with ambiguity, stating, “So, I … So, no I wouldn't, but I'm not sure what was going through Godwin's mind at the moment and … um … yep.”
In another twist, Jane Hume has initiated an inquiry into why Treasury agreed to cost the Coalition's policy of tax breaks for small businesses. This inquiry has added another layer of complexity to an already fraught political environment.
Kennedy’s assertions about maintaining Australia’s economic principles during challenging times resonate strongly. He emphasized that one of the key components of preparing Australia for success amid global uncertainty is ensuring that it does not isolate itself from international markets.
"Part of setting up Australia for success in an increasingly uncertain global economy is making sure we do not cut ourselves off from the world."
— Steven Kennedy
While the debates continue and political tensions mount, it is clear that Australia must navigate these waters carefully. The stakes are high as tariffs threaten to disrupt not only domestic economic stability but also Australia's standing within the global marketplace.
