Trump’s ‘Liberation Day’ overshadows Reserve Bank’s rate call
US President Donald Trump’s promised “liberation day” is coming, but Australian mortgage holders hoping to be freed from high interest rates might have to wait a while longer.
The Reserve Bank’s cash rate decision meeting usually ranks as the biggest economic event of any given week. But with most analysts and the market confident of no change, all eyes turn to Washington, where the biggest round yet of tariffs imposed on American imports is set to be announced on Wednesday (US time).
The Reserve Bank’s cash rate decision meeting usually ranks as the biggest economic event of any given week.Credit: Louie Douvis
Australian steel and aluminium producers have already been hit by 25 per cent tariffs, but so-called reciprocal levies could impact all export industries if Trump follows through on his threat to treat Australia’s 10 per cent goods and services tax as a trade impediment.
Betashares chief economist David Bassanese says it’s a “ridiculous argument”, given the GST is a value-added tax that is imposed indiscriminately on local consumption and imports to Australia equally.
“We’ll wait and see, but that would be very unfair and unfortunate if we were to go down that path,” Bassanese told AAP.
There were two stages to the tariff impact on the economy, he said. Firstly, the announcement stage, in which uncertainty over who will face tariffs, how high they will be and how long they will last negatively impacted markets. Then comes the actual impact on the economy, with analysts sweating on the data to be released over the next few weeks and months to assess the extent of the damage.
In the US, tariffs risked raising prices and softening activity. But because Australia ruled out imposing reciprocal tariffs of its own, the risk to domestic economic growth was the more pressing concern, Mr Bassanese said.
“So to the extent the trade war heats up, it’s more likely to lean in favour of the RBA cutting rates than raising,” he said.
Still, there is little chance of the Reserve Bank backing up its drought-breaking February rate cut with another 25 basis points of relief on Tuesday.
