For Michele Bullock and the RBA, Trump's tariffs are a sideshow. It's all about China.
Uncertainty surrounding the impact of US tariffs on Australia could partially clear once China sets a clear path on whether to deliver domestic stimulus or not.
Shortly after the Reserve Bank put an interest rate change on ice for another month, pending further information, Michele Bullock stressed that the central bank’s main offshore focus is not the US — it's China.
While Donald Trump’s tariffs are putting downward pressure on prices in Australia, Bullock said a “big chunk of uncertainty” would persist until China finalises its response to the US president’s economic disruptions.
Bullock noted the trade barriers are “partly what’s driving some of the deflationary impact in our forecast”, but said Australia would not “be anywhere near as badly impacted as some countries because we’re not as directly linked to the United States and our fortunes are much more linked to China”.
If China — Australia's largest import and export trading partner — reacts by implementing “fiscal and monetary stimulus” to keep its growth going, that will “help to cushion for us”.
