Australia’s economy will be able to withstand global financial shocks stemming from a second Donald Trump US presidency, Treasurer Jim Chalmers says.
In a speech to the Australian Institute of International Affairs on Monday, Chalmers will say Australia is likely to fare better than other nations in handling potential economic pressures.
Trump has proposed significant tariffs on imports into the United States as part of his second-term agenda.
But Chalmers says Australia is prepared for such a scenario should the measures be implemented.
“We should expect a small reduction in our output and additional price pressures, particularly in the short term,” Chalmers will say.
“But specific features of the economy, like a flexible exchange rate and independent central bank, would help mitigate against some of this.”
Chalmers will say the impact globally to the proposed tariffs from the US would be much more substantial, according to Treasury modelling carried out before the US election.
“The timing of this, and the responses and ramifications that might follow — what economists call second-round effects — are difficult to predict,” Chalmers will say.
“But we wouldn’t be immune from escalating trade tensions that might ensue. This is consistent with the views expressed last week by the prime minister.”
Australia was able to negotiate significant exemptions to tariffs imposed by the US during the first Trump term.
Chalmers believes Australia’s diplomatic efforts had a key bearing on economic policy.
“Economic policy and foreign policy have always been interlinked, but now they’re almost indistinguishable,” he will say.
“In this uncertain world characterised by economic vulnerability and volatility, our foreign policy team is a team effort which brings economic benefits.”
The speech comes ahead of Prime Minister Anthony Albanese’s trip to South America later in the week for talks with world leaders at the Asia-Pacific Economic Cooperation and G20 summit.
The summits will be the last time Albanese will be face-to-face with outgoing US President Joe Biden.
Chalmers will say that despite the outcome of the US election, the relationship with America will remain strong.
“Our relationship with America under presidents and prime ministers from all sides is strong and enduring.
“Of course, we expect the incoming US administration to bring a different suite of policies, and we are confident in our ability to navigate that change as partners. Nobody should underestimate our ability to make it work. We are well placed and prepared.”
