Australian treasurer Jim Chalmers has blamed “bad decisions” on tariffs for stock markets tumbling around the world, even as his department forecasts only minor impacts on domestic economic growth and inflation.
Speaking in Sydney on Monday, Chalmers said markets now expect the Reserve Bank to cut interest rates more quickly in response to the uncertainty created by President Donald Trump’s tariffs. The treasurer said he earlier spoke with RBA Governor Michele Bullock ahead of the opening of the stock market to “compare notes” on their expectations for the economic fallout from the tariffs.
Money markets are pricing four RBA rate cuts, beginning in May, with a 67% chance of a fifth reduction this year. The May meeting includes a good chance of a half percentage-point reduction.
The treasurer sought to assure voters that the local economy is well placed to weather any global headwinds. Australia will hold a national election on May 3.
“What we’re seeing here is the impact of a series of bad decisions taken about tariffs, and the whole world is trying to get their head around the impacts,” Chalmers told reporters. “But we are better placed, we are better prepared and Australians should take comfort from that.”
His comments came after the Australian Treasury released its Pre-Election Economic and Fiscal Outlook showing slightly wider budget deficits in the year through June and the period through June 2025. Treasury highlighted greater-than-usual uncertainty in forecasts caused by the tariff announcement.
The PEFO must be released within 10 days of an election being called, even though the center-left government handed down a budget on March 25.
“The increase in tariffs announced over the past few days have been more significant than expected,” Treasury said in the release. “The potential magnitude and persistence of the economic effects of these announcements has resulted in greater‑than‑usual uncertainty around the outlook.”
A flight from global equities accelerated on Monday and investors piled into haven assets as fallout from tariffs deepened after China announced retaliatory measures. Concerns are rising that Trump’s attempts to reshape global trade in Washington’s favor are increasing the risk of a recession.
At the same time as PEFO was issued, the Treasury released an analysis of the impact on Australia of Trump’s tariffs, which includes a 10% levy on Australian exports to the U.S.
Australia’s real GDP is estimated to decline by just 0.1% as a result of the imposts, according to modeling requested by Chalmers after Trump’s announcement, with a rise of just 0.2% in inflation in the short term.
Still, Treasury warned the effects would be distributed unevenly, with trade-exposed industries such as agriculture, energy and mining the worst affected.
It said most of Australia’s exposure to tariffs came from its trading partners in East Asia, rather than from direct exports to the U.S., adding that nations such as China may turn to Australia as a preferred export market resulting in some small gains.
