Michele Bullock, the RBA governor, recently spoke publicly for the first time following the introduction of extensive tariffs on most imports to the US. She anticipated a phase of uncertainty and adaptation as nations react to these changes.
During the Chief Executive Women annual gathering in Melbourne, Bullock commented, “It will require some time to observe the outcomes of these actions. The heightened unpredictability necessitates our patience as we analyze the potential impact on global demand and supply.”
President Trump’s initial imposition of “reciprocal” tariffs, which included many countries and even US allies, with levies reaching 49%, instigated a significant drop in global stock markets. Consequently, Australian banks were confident about an imminent interest rate reduction at the upcoming RBA meeting in May.
But that 100 per cent expectation of a decrease softened yesterday to 73 per cent on the back of the president’s decision to pause the extra charges for 90 days, while targeting China with 125 per cent tariffs. Other countries such as Australia would still face a 10 per cent so-called “baseline” tariff on goods sent to the US in the interim.
But Bullock was making no such commitments last night, saying the bank was closely watching domestic and financial markets, along with how Australian families and businesses reacted.
“We are mindful of not adding to the uncertainty, and to that end, it’s too early for us to determine what the path will be for interest rates,” she said. “Our focus remains on our dual mandate for price stability and full employment.”
But she had a note of positivity for those making comparisons to the economic devastation of the global financial crisis.
The full list of Trump’s ‘reciprocal’ tariffs
“Financial market and economic volatility can be expected as this process unfolds. But there are two points I want to make on this,” she said.
“First, we’re not currently seeing the same degree of impact as previous market events like in 2008 for example.Â
“And second, the Australian financial system is strong and well placed to absorb shocks from abroad.”
“It’s a really good opportunity for us to confer with, compare notes with and coordinate our efforts with the regulators and others involved in the market right now,” he said ahead of the meeting.
“We are confident that we can weather these global conditions, but we’re not complacent.”
