At a Senate budget estimates hearing on Wednesday, Treasury secretary Steven Kennedy confirmed that the modelling highlighted major ripple effects for Australia, particularly if US trade tariffs were to rise sharply.
While Kennedy refrained from commenting directly on the US presidential candidates, focusing instead on their policies, former president Donald Trump has threatened to impose higher trade tariffs on US partners, including a potential 60 per cent tariff on China – Australia’s largest export market.
Questioned by Senator Jane Hume, Kennedy revealed that the Treasurer tasked the Treasury with carrying out the modelling for the government’s benefit due to the high significance of the US election.
“With any significant change on the way and potential policies, we’ll prepare advice for the government,” he said.
“There are some policies that proponents in the US election have announced, including, for example, tariff increases and other types of changes and we thought it was worth the government understanding the impact of those policy changes not only on the US but on our major trading partners such as China, and then what it potentially does for Australia.”
Providing more insight into the modelling’s findings, Kennedy revealed that Treasury concluded a sharp increase in tariffs would not only impact the US and Chinese economies but would also trigger inevitable flow-on effects for Australia.
“In broad terms, the imposition of trade restrictions such as tariffs typically lead to lower growth and higher inflation,” Kennedy said.
“The implications for Australia are more about growth because of the implication for China, of course, and their demand for our goods.”
Pushed by Hume on whether the Prime Minister was briefed on the modelling, Kennedy said the cabinet was, and therefore the PM, too.
Last month, Treasurer Jim Chalmers told the media that the government was engaging in modelling, noting that “any diligent government” would consider the different scenarios when it comes to elections outcomes in a “big, significant country like the US”.
“And that’s what we’ve been doing,” Chalmers said.
“We know that there will be a change of administration in the US, and so we think through the consequences of that.”
At the time, Chalmers stressed that Australia will “work with whoever the Americans choose to lead them”, while also highlighting the grave consequences of trade wars.
“Australia has been and will be one of the biggest beneficiaries of well‑functioning global markets. Trade wars can be costly for countries like ours …. We need more engagement with the world, not less. That’s what our policies are all about,” Chalmers said.
Asked on Wednesday whether the Coalition has concerns regarding the impact promises made by both presidential candidates could have on the global economy, shadow treasurer Angus Taylor failed to answer the question directly, instead diverting to his current concerns about the local economy.
“In terms of the US–Australian relationship, I think we’re going to be bigger than any individual election outcome regardless of what it is,” Taylor said.
“A strong US economy is good for Australia and good for the world. And I tell you what, we’ve seen, a strong US economy, there’s no doubt about that. On every indicator, it’s stronger than what we’ve got here in Australia. It underscores the failure of this government.”
RBA refrains from modelling
Speaking to the media on Tuesday, the Reserve Bank governor Michele Bullock said the bank has looked at the US, but in a more broad sense alongside other geopolitical risks and their possible impacts on the local economy.
“We don’t do specific scenarios for every single one of those because we would spend all of our days doing scenarios,” Bullock said.
“Once we find out what that is and what the policies of that particular person elected into administration is, then we can make decisions about what that might imply for the world economy. But I think it’s premature to actually do it ahead of that.”
