Treasurer Jim Chalmers has called an emergency crisis meeting with top economic officials to deal with Donald Trump‘s tariffs – as the Australian dollar plunged to a five-year low and another $50billion was wiped from shares.
The unprecedented gathering during an election campaign will occur after the Trump Administration threatened to impose 104 per cent tariffs on China, Australia’s biggest trading partner.
Financial markets are now expecting the Reserve Bank to cut another 100 basis points off interest rates by the end of 2025, taking it from the current rate of 4.1 per cent to 3.1 per cent.
The Australian share market was 1.9 per cent weaker in early trade, with the benchmark S&P/ASX200 losing another $53billion just half an hour after the market opened.
‘We’re working closely with the regulators and financial institutions to ensure that everything possible is being done to safeguard Australians from this global volatility,’ Mr Chalmers said.
‘These escalating trade tensions are casting a dark shadow over the global economy but Australia’s robust economy and budget puts us in good stead.’
Reserve Bank of Australia Governor Michele Bullock and Treasury Secretary Steven Kennedy will attend the meeting.
Banking regulator John Lonsdale, the chairman of the Australian Prudential Regulation Authority, will also be in attendance along with Australian Securities and Investments Commission chair Joe Longo and Australian Competition and Consumer Commission chief Gina Cass-Gottlieb.
Treasurer Jim Chalmers has called an emergency crisis meeting of Australia’s top economic officials to deal with Donald Trump ‘s tariffs
Fears about a global recession have hammered the Australian dollar, which on Wednesday fell to 59 US cents for the first time since March 2020 during the start of Covid.
The futures market now regards a super-sized 50 basis point Reserve Bank interest rate cut on May 20 as an 82 per cent chance of happening.
More cuts throughout 2025 totalling 100 basis points, on top of February’s easing, would see the cash rate fall to the lowest level since February 2023.
Opposition Leader Peter Dutton claimed a recession was now looking more likely as the Trump tariffs battered global financial markets.
‘It is under Labor. Huge tsunami waves will hit our shores in no time at all,’ he said.
Mr Chalmers slammed Mr Dutton for talking up recession fears – even though economists are now concerned about a severe economic downturn.
‘With his reckless comments on a recession, Peter Dutton has proven again today why he is the biggest risk to Australia’s economy,’ he said.
But AMP deputy chief economist Diana Mousina said even more aggressive rate cuts were possible to mitigate the risk of a recession in Australia, including a larger 50 basis point rate cut in May.
The unprecedented gathering during an election campaign has occurred after the Trump Administration threaten to impose 104 per cent tariffs on China , Australia’s biggest trading partner (pictured is US President Donald Trump with coal miners in the White House)
‘If the hit to Australian growth and financial markets is larger than expected from US and reciprocal tariffs, we may see a faster and more aggressive cutting cycle this year, with potentially four more rate cuts this year alone and a 50 basis point rate cut can’t be ruled out at the May board meeting, as a form of insurance against any recession risks,’ she said.
‘The large falls in global share markets from US tariffs and the potential hit to global growth means that larger and faster rate cuts could occur in coming months.’
Treasury’s pre-election forecasts didn’t have Australia falling into a recession.
If the rate cuts were less aggressive, Ms Mousina expected the Reserve Bank cash rate to fall to 3.1 per cent by 2026, which would be lower than the average level of the 2010s when inflation was consistently below the RBA’s 2 to 3 per cent target.
‘Interest rates are likely to fall further this year and the growth threat from tariffs increases the need for rate cuts,’ she said.
‘We expect the cash rate to decline to 3.6 per cent by the end of this year and to end the cutting cycle at 3.1 per cent.
‘This is higher than average interest rates in the decade prior to Covid.’
The Australian share market lost more than $100billion on Monday, as Trump’s tariffs stirred fears of a global recession.
The losses occurred again on Wednesday morning with the benchmark S&P/ASX200 losing 1.9 per cent during the first half hour of trade, wiping another $53billion off investments.
The Trump Administration is inflicting 10 per cent tariffs on Australia despite the US having a trade surplus dating back to 1952.
Prohibitive tariffs on China are expected to see Asian nations flood Australia with cheap goods, which could potentially bring down inflation and give the RBA room to cut interest rates.
This would occur even with a weak Australian dollar, which traditionally make imports more expensive.
