Australia faces challenging economic conditions as the Treasurer issues a stark warning about the impact of global trade tensions on the nation’s growth prospects. The potential fallout from a worldwide trade war could slash billions from Australia's economy by 2030. The Treasurer has highlighted this grim forecast, emphasizing the need for vigilance in navigating these turbulent times.
Tariffs and Their Impact
The direct effects of steel and aluminium tariffs imposed by United States President Donald Trump are considered "manageable" according to the Treasurer. However, it is the indirect consequences that pose a greater threat to Australia's economic stability. These tariffs are projected to shave approximately 0.1 percent off Australia's GDP by the end of the decade, equating to an estimated $3 billion based on current standards.
"The direct impacts are concerning but manageable. It's the broader, indirect impacts that come from, you know, this serious escalation of trade tensions around the world, which is much more concerning to us." – Mr Chalmers
The Organisation for Economic Development and Coordination (OECD) has revised down its expectations for Australia's growth as a result of these global developments. While no immediate change in growth is anticipated this year, a slowdown is expected to continue, with growth projected to decelerate by another 0.7 percent to 1.8 percent in 2026.
Global Economic Outlook
The OECD has also adjusted its forecasts for the global economy, indicating a cautious outlook amidst rising trade tensions. It is estimated that by 2030, tariffs could potentially reduce global GDP by 0.02 percent. Despite these challenges, the OECD predicts that Australia's core inflation rate will fall to 2.4 percent over 2025 and further to 2.2 percent in 2026.
"In a world of retaliation and escalation, the impacts of tariffs are amplified, they linger for longer, resulting in a bigger reduction in GDP and a bigger increase in prices," – Mr Chalmers
Navigating Uncertain Times
The Treasurer has underscored the urgency of adapting to this new world of economic uncertainty. As the rules of global economic engagement continue to evolve rapidly, particularly since the new administration took office in the US, Australia must remain agile in its economic strategies.
"This is a new world of uncertainty, and the pace of change in the world when it comes to rewriting the rules of global economic engagement has quickened since the new administration took office in the US," – Mr Chalmers
