Australian Treasurer Jim Chalmers attributed global stock market declines to “bad decisions” regarding tariffs, despite predictions from his department indicating only minimal effects on the country’s economic growth and inflation.
In a statement made in Sydney on Monday, Chalmers explained that markets are anticipating a quicker reduction in interest rates by the Reserve Bank of Australia (RBA) due to the uncertainties caused by President Donald Trump’s tariffs. He had consulted with RBA Governor Michele Bullock before the stock market opened to discuss expectations surrounding the economic impact of these tariffs.
Financial markets are forecasting four RBA rate cuts starting in May, with a 67% likelihood of a fifth cut within the year. The meeting in May might include a potential half percentage-point reduction.
Chalmers reassured the public that the Australian economy is well-positioned to withstand global challenges. Australia is set to conduct a national election on May 3.
He addressed the issue, stating, “The impact of a series of bad decisions concerning tariffs is evident, and the world is grappling with understanding the repercussions. However, we are in a better state, better prepared, and Australians should feel confident.”
His remarks followed the release of the Australian Treasury’s Pre-Election Economic and Fiscal Outlook, which indicated slightly larger budget deficits through June and until June 2025. The Treasury emphasized increased uncertainty in forecasts due to the tariff announcement.
The PEFO is required to be published within ten days of calling an election, even though the center-left government presented a budget on March 25.
“The tariff increases announced recently have been more substantial than anticipated,” the Treasury noted in the release. “The potential scale and persistence of these announcements have led to greater-than-normal uncertainty in the outlook.”
As a response to the tariffs, global equity markets saw accelerated sell-offs, with investors moving towards safer assets. Concerns are mounting that Trump’s trade reforms may heighten recession risks.
Simultaneously with the PEFO release, the Treasury issued an analysis of Trump’s tariffs’ impact on Australia, which includes a 10% levy on Australian exports to the U.S.
The analysis, requested by Chalmers after Trump’s announcement, estimates that Australia’s real GDP would decrease by just 0.1%, with a short-term inflation increase of only 0.2%.
Nevertheless, the Treasury cautioned that the effects would not be uniform, impacting trade-exposed sectors like agriculture, energy, and mining the most.
It also noted that Australia’s tariff exposure primarily stems from its East Asian trading partners rather than direct exports to the U.S., suggesting countries like China might shift towards Australia as a preferred export market, potentially yielding minor gains.
This article originally appeared on Fortune.com.
