‘Jumping at shadows’: RBA call on Trump

Michele Bullock has weighed in on the uncertainty swirling around Donald Trump’s election win last week, saying Australia’s central bank “can’t be jumping at shadows”.

The prospect of a second Trump term has sparked nervousness in Canberra about where Australia would fit into the US president-elect’s America first agenda.

But the Reserve Bank of Australia (RBA) Governor told a forum on Thursday there was no point setting policies for things that have not happened.

“We don’t actually know what will happen,” Ms Bullock said.

“We don’t actually know what he will implement and what the administration will implement.

“So I think that’s really important upfront. We can’t be jumping at sort of shadows.

“We can’t be sort of setting our policy now on expectations of what we think he might do, because we don’t know.”

Treasurer Jim Chalmers earlier this week warned Australia would be hit by Mr Trump’s floated trade policies to slap blanket tariffs on foreign imports.

The incoming president has said he was mulling levies of up to 20 per cent in a bid to boost American manufacturing.

He has also proposed whacking tariffs of 60-100 per cent on Chinese products.

Such a move would serve a major blow to Beijing, the biggest challenge to Western economic and military dominance.

But Treasury modelling has shown it would also have wide-ranging effects, including in Australia.

Ms Bullock said whatever the incoming US administration’s geo-economic policies, Australia would need to navigate how other countries respond.

“What ultimately happens for Australia is going to be depend on the responses of other countries as well,” Ms Bullock said.

“We don’t know, in the very extreme circumstance, a 60 per cent tariff on Chinese goods, we don’t know how the Chinese will respond to that.

“Ultimately, if it’s not good for the Chinese economy, it isn’t good for us either.”

She added that “most central banks at the moment are simply focused on what they know at the moment”.

Mr Trump’s policies have not been set in stone, but the mere idea of rapidly hiking tariffs has triggered economic anxiety.

And with Washington enjoying a trade surplus with Australia, and Australia being a crucial supplier of rare earth minerals and steel to the US, the bilateral trade relationship may fair better than others.

But the Treasury’s modelling has shown Australia’s other trade relationships would be hit, with Mr Chalmers warning in a speech on Monday night that Australia “wouldn’t be immune from escalating trade tensions that might ensue”.

Meanwhile, Anthony Albanese has landed in Peru for the Asia-Pacific Economic Cooperation (APEC) summit, where he will spruik Australia’s trade offerings with some of the world’s fastest growing economies.

“APEC represents, with its 21 economies, some 75 per cent of Australia’s trade,” the Prime Minister told reporters in the Peruvian capital Lima.

“Australia will always support free and fair trade. We’re a trading nation.

“One in four of Australia’s jobs is trade dependent, and that will be a focus with the meetings that we will have over coming days.”

Mr Albanese will also attend the G20 summit in Brazil.