Synopsis
The Reserve Bank of Australia asserts that US tariffs will have a minimal impact on the nation's economy, emphasizing its lower vulnerability compared to other countries. The RBA has also lowered interest rates in response to inflation trends, indicating a cautious approach moving forward.Key Takeaways
- Australia is less vulnerable to US tariffs.
- The impact on GDP is expected to be minimal.
- Government seeks exemption from tariffs.
- RBA has cut interest rates for the first time since 2020.
- Inflation rates have shown a significant decline.
Canberra, Feb 21 (NationPress) The Reserve Bank of Australia has indicated that Australia is not as susceptible to the effects of US tariffs as many other nations.
Sarah Hunter, Assistant Governor and Chief Economist of the RBA, stated on Friday that the 25 percent tariffs imposed by US President Donald Trump on steel and aluminum imports will have a limited impact on Australia’s Gross Domestic Product (GDP).
"We are not as exposed as other countries," she mentioned during a parliamentary inquiry in Canberra.
"Tariffs can lead to significant disruptions in the short term, often resulting in major downturns within their economies, affecting both GDP and inflation. Our trade dynamics are distinct here."
The Australian government is actively seeking an exemption from the steel and aluminum tariffs, having been left out of similar tariffs during Trump's initial presidential term.
Hunter noted that the impact of the tariffs on Australia’s economy would largely depend on how other countries react.
On Tuesday, the RBA's board of governors reduced the official cash rate target by 25 basis points to 4.1 percent, marking the first adjustment to the key interest rate since November 2020, as reported by Xinhua.
This decision followed a decrease in Australia’s annual headline inflation rate to 2.4 percent in December, down from a peak of 7.8 percent in December 2022.
Michele Bullock, the RBA governor, acknowledged on Friday that the central bank was "too slow" to react to climbing inflation rates.
The RBA had raised the cash rate target 13 times between May 2022 and November 2023, increasing it from a record low of 0.1 percent to 4.35 percent.
"We arguably delayed our interest rate increases. We should have responded more swiftly to inflation," Bullock stated.
She emphasized that the bank will be cautious regarding future interest rate reductions, cautioning that premature cuts could hinder or derail efforts to combat inflation.
