Rate cuts, recession a risk on Trump's 'rollercoaster'
Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars.
"Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility.
"It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements.
The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition.
Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely.
"In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday.
"And so our expectation is that our economy will continue to grow and that growth will strengthen next year."
Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said.
"What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world."
Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected.
There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday.
Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy.
And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut.
NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting.
While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said.
"I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast.
Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February.
Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said.
But the glide path down depends on developments overseas.
While it was a "confident cut", Ms Bullock said future moves were uncertain.
In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band.
That would necessitate more rate cuts than the baseline scenario of three more by early 2026.
But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts.
Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says.
Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars.
"Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility.
"It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements.
The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition.
Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely.
"In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday.
"And so our expectation is that our economy will continue to grow and that growth will strengthen next year."
Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said.
"What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world."
Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected.
There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday.
Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy.
And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut.
NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting.
While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said.
"I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast.
Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February.
Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said.
But the glide path down depends on developments overseas.
While it was a "confident cut", Ms Bullock said future moves were uncertain.
In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band.
That would necessitate more rate cuts than the baseline scenario of three more by early 2026.
But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts.
Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says.
Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars.
"Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility.
"It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements.
The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition.
Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely.
"In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday.
"And so our expectation is that our economy will continue to grow and that growth will strengthen next year."
Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said.
"What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world."
Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected.
There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday.
Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy.
And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut.
NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting.
While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said.
"I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast.
Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February.
Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said.
But the glide path down depends on developments overseas.
While it was a "confident cut", Ms Bullock said future moves were uncertain.
In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band.
That would necessitate more rate cuts than the baseline scenario of three more by early 2026.
But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts.
Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says.
Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars.
"Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility.
"It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements.
The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition.
Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely.
"In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday.
"And so our expectation is that our economy will continue to grow and that growth will strengthen next year."
Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said.
"What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world."
Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected.
There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday.
Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy.
And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut.
NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting.
While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said.
"I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast.
Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February.
Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said.
But the glide path down depends on developments overseas.
While it was a "confident cut", Ms Bullock said future moves were uncertain.
In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band.
That would necessitate more rate cuts than the baseline scenario of three more by early 2026.
But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts.
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