The Australian economy could face significant challenges due to proposed tariffs by former US President Donald Trump, according to Andrew Hauser, the Deputy Governor of the Reserve Bank of Australia (RBA). In remarks delivered during a speech at the Economic Society of Australia in Sydney on March 15, 2024, Hauser expressed concern about the long-term implications of these tariffs, noting that the financial markets appear to be largely unconcerned.
Hauser highlighted Trump’s potential imposition of a 200 percent tariff on pharmaceuticals, a key export for Australia, alongside a proposed 50 percent tariff on copper. Despite these alarming figures, he observed that markets appear to “shrug and move on.” He questioned this nonchalance, stating, “Central banks globally are watching Trump’s tariff plans like hawks,” while traders in financial markets seem relatively unconcerned.
Reflecting on historical precedents, Hauser referenced the aftermath of Brexit, when initial fears did not materialize as expected. “The day after Brexit happened, everyone thought the world would end, and it didn’t,” he remarked. He emphasized that the effects of such macroeconomic changes often take years to fully manifest.
Hauser further noted the peculiar social media narrative suggesting that “nothing ever happens” with Trump’s tariffs, which he finds puzzling given the substantial economic shifts currently underway. He underscored the elevated level of uncertainty and its profound implications for Australia, a nation heavily reliant on global trade.
RBA’s Strategic Rethink
In light of these evolving challenges, the RBA is initiating a strategic re-evaluation of its research priorities. Hauser pointed out that the global economy is experiencing significant transformations, including the rollback of free trade, shifting geopolitical alliances, and the pressing issue of climate change. He articulated the need for a renewed focus on the “defining macroeconomic challenges of our age,” which he believes are critical for future policymaking.
Hauser called for a “Golden Age” of Australian economic thinking, urging the country to attract and nurture top academic talent to address pressing policy issues. He drew parallels between the current economic climate and two pivotal periods in Australian history: the recovery from the Great Depression through World War II and the major economic reforms of the 1980s and 1990s.
He posed a compelling question: “Can Australian macroeconomic thinking do it again, as the world economy is once more in flux?”
Hauser stressed the urgency of communicating the significance of these challenges to the broader community. He advocated for collaboration between academics, policymakers, and economists to foster a shared understanding of both the problems and potential solutions. This cooperative approach is deemed essential to navigate the complexities of the current global trading environment.
Adapting to Global Changes
The Deputy Governor also noted that the federal government’s economic think tank has indicated Australia could benefit from Trump’s tariffs, provided the nation refrains from retaliatory measures. He emphasized that Australia must adapt to major changes in the global trading landscape, given its economic dependence on international markets.
“We can go one better: by marshalling our best brains, we can turn this challenging environment to our advantage,” Hauser asserted. He affirmed the RBA’s commitment to playing a significant role in this endeavour.
As the world shifts towards a more regionalized and less open trading system, understanding the macroeconomic risks and opportunities is crucial. Hauser concluded with a call to action for the Australian academic and policy community to work together in addressing the pressing economic challenges ahead.
“At the RBA, we stand ready to play our part in this great endeavour,” he said, reinforcing the bank’s commitment to navigating the uncertain economic terrain shaped by both domestic and international developments.
