Speaking to the Australian Institute of International Affairs earlier this week, Treasurer Jim Chalmers revealed that Treasury’s recent scenario analysis of the US election suggests Australia could fare well under Donald Trump’s policies in the short term. However, he raised concerns about the long-term impact.
“In short, Treasury’s analysis demonstrated that we should expect a small reduction in our output and additional price pressures, particularly in the short term,” Chalmers said.
“But specific features of our economy – like a flexible exchange rate and independent central bank, would help mitigate against some of this.”
Chalmers warned the global impact could be “much more substantial”, but the timing and future ramifications remain tough to predict.
“We wouldn’t be immune from escalating trade tensions that might ensue,” the Treasurer warned.
“This is consistent with the views expressed last week by the Prime Minister, Treasury secretary, Reserve Bank governor, and CEO of the National Australia Bank.”
Earlier this month, Treasury secretary Steven Kennedy confirmed that Treasury modelling highlighted major ripple effects for Australia in the event of a Trump win, particularly if US trade tariffs were to rise sharply.
At a Senate budget estimates hearing, Kennedy said: “In broad terms, the imposition of trade restrictions such as tariffs typically lead to lower growth and higher inflation.
“The implications for Australia are more about growth because of the implication for China, of course, and their demand for our goods,” he added at the time.
Expounding on this, the Treasurer noted that while traded goods and services make up about a quarter of the US’ gross domestic product (GDP), for Australia, trade is “half of our economy”.
Ahead of Trump’s potential 60 per cent tariff on Australia’s biggest trading partner, Chalmers proposed “de-risking” as a way to strengthen supply chains and boost green industries, warning that “decoupling” could restrict markets and hurt economic growth.
“Nobody wins from a trade war, but we have more at stake than most,” he said.
‘Nobody should underestimate our ability to make it work’
This week, Chalmers noted that while modelling was one part of the government’s preparation for a Trump presidency, “the diligent work done in DC” was another.
Commending Kevin Rudd, Chalmers said Rudd is “building good relationships with Republicans and Democrats alike”.
Interestingly, after Trump declared victory last week, Rudd, currently serving as US ambassador, deleted comments he previously made about Trump, including one where he described the President-elect as “the most destructible president in history”.
However, according to Chalmers: “Ambassador Rudd helped many of us build and deepen our connections across the political aisle.”
Rudd, the Treasurer said, also introduced him to Scott Bessent, who is currently considered the top candidate for Treasury secretary.
“Getting more than an hour with a key member of President Trump’s economic team 12 days before the election was a very valuable opportunity,” he said.
“We spoke about monetary policy, inflation, and tariffs and trade.”
Ultimately, Chalmers said: “Nobody should underestimate our ability to make it work.
“We are well placed and well-prepared. Like any diligent country, Australia was ready for either outcome.”
