Donald Trump a threat to Australia’s economy: McKibbin John KehoeEconomics editor
Sep 27, 2024 – 8.43am
Australia’s economy would be damaged in the long term if Donald Trump wins the United States election in November and implements tariff hikes on Chinese exports, new world-first research suggests.
Trump has promised to impose 60 per cent tariffs on imports from China, cut immigration, and threatened to erode the independence of the US Federal Reserve.
A 51-page research paper and detailed economic modelling led by Australian National University economist and former Reserve Bank board member Warwick McKibbin delves into the implications of these policies.
“US tariffs on China are bad for Australia,” Professor McKibbin said.
The research found that because Australia exports large amounts of mining, energy and agricultural goods to China, it would be hurt by big US tariffs on Australia’s largest trading partner that would cause investment capital to flow out of the Asian nation.
“Countries like Australia that rely on the Chinese economy through exports of final goods such as agriculture and via production networks, especially mining and energy inputs into Chinese production, also experience capital outflows to the US-centric countries,” the paper notes.
The modelling suggested Australia’s economic output would initially rise by up to 1 per cent due to Trump’s combined economic policies by 2028, but then GDP would fall to be 0.2 per cent lower overall by 2034.
Only China’s economy would suffer a bigger hit in the long term, the research calculated.
Joe Hockey, Australia’s former federal treasurer and ambassador to the US, said on Thursday: “It is singularly the worst election campaign in living memory for anyone that cares about economics.”
He warned big deficit spending to fund tax cuts would be bad for the US dollar. “You’ll see the US dollar drop, most particularly under Trump because there’s no handbrake,” Mr Hockey said in an address to the National Press Club in Canberra.
“Donald Trump’s policy platform is absurd in its largesse, and I’ve said it to president Trump: ‘You can’t keep spending’. He ran massive deficits, massive deficits.”
Economists made similar warnings as Professor McKibbin and Mr Hockey ahead of Trump’s 2016 election victory. But Trump’s pro-business policies of tax cuts for corporates and workers, cutting red tape, and backing drilling of oil and gas helped underpin strong economic growth before the interruption of the pandemic.
His current policies threatening to fire US Fed chair Jerome Powell and impose large tariffs of 60 per cent on China are considered much more troublesome.
Meanwhile, Jim Chalmers arrived in Beijing on Thursday to become the first Australian treasurer in seven years to visit China. He met with Zheng Shanjie, chairman of China’s National Development and Reform Commission.
“Our relationship with China is full of complexity and opportunity,” Dr Chalmers said in a statement on Thursday before the meeting. “We recognise a more stable economic relationship between Australia and China is a good thing for Australian workers, businesses, investors and our country more broadly.”
Before leaving for China, Dr Chalmers consulted senior leaders of major Australian companies with business in the Asian country, including miners Rio Tinto, Fortescue Metals and BHP, financial services giants Macquarie and HSBC, and law firm King & Wood Mallesons.
President Xi Jinping used the monthly gathering of China’s 24-person Politburo on Thursday to call for the government to provide sufficient fiscal spending to support the stimulus package announced by China’s central bank this week, Xinhua News Agency reported.
Authorities said Beijing needed to stabilise the property market, including limiting the supply of new commercial housing construction.
