One of Queensland's leading economists has outlined the potential impact of US President Donald Trump's protectionist policies on Australia's economy – and it could spell disaster for the country.
But he said Trump's inability to fully implement his agenda should prove to be Australia's saving grace.
More World News Videos
- Video duration
- 03:30
Donald Trump meets with Malcolm Turnbull
Donald Trump meets with Malcolm Turnbull
Agreeing that reports of their phone call earlier this year were 'fake news', the US President and the Australian Prime Minister hold a press conference in New York.
Up Next
Ivory Coast army to quell mutiny
- Video duration
- 00:33
- Video duration
- 00:33
Ivory Coast army to quell mutiny
Ivory Coast army to quell mutiny
Ivory Coast has launched a military operation "to re-establish order" on the third day of a nationwide army mutiny over bonus payments.
Up Next
James Clapper: US 'under assault' from Trump
- Video duration
- 01:17
- Video duration
- 01:17
James Clapper: US 'under assault' from ...
James Clapper: US 'under assault' from Trump
Former US director of National Intelligence James Clapper tells CNN that President Donald Trump is undermining the nation's institutions after his decision last week to fire FBI director James Comey.
Up Next
North Korea's leader in 'state of paranoia'
- Video duration
- 01:26
- Video duration
- 01:26
North Korea's leader in 'state of ...
North Korea's leader in 'state of paranoia'
US Ambassador to the United Nations, Nikki Haley, blasted North Korea's latest ballistic missile launch saying it stemmed from leader Kim Jong Un's 'state of paranoia'.
Up Next
New version of ransomware worm expected
- Video duration
- 01:12
- Video duration
- 01:12
New version of ransomware worm expected
New version of ransomware worm expected
Cyber security experts warning that new versions of the ransomware that crippled businesses and schools across the globe may wreak fresh havoc as employees return to work.
Up Next
Putin the pianist: Can he really play?
- Video duration
- 00:39
- Video duration
- 00:39
Putin the pianist: Can he really play?
Putin the pianist: Can he really play?
Russian President Vladimir Putin plays piano while awaiting Chinese leader Xi Jinping for bilateral talks in Beijing.
Up Next
France honours its new president
- Video duration
- 01:28
- Video duration
- 01:28
France honours its new president
France honours its new president
In ceremonies marked by youthful optimism and old-world Napoleonic pomp, Emmanuel Macron is inaugurated as France's new president pledging to fortify the European Union, redesign French politics and glue together his divided nation.
Up Next
Cyclists smash into motorbike in Giro d'Italia
- Video duration
- 01:03
- Video duration
- 01:03
Cyclists smash into motorbike in Giro ...
Cyclists smash into motorbike in Giro d'Italia
Cyclists fall like dominoes after a rider clips a stationary police motorcycle on the side of the road on the ninth leg of the race.
Donald Trump meets with Malcolm Turnbull
Agreeing that reports of their phone call earlier this year were 'fake news', the US President and the Australian Prime Minister hold a press conference in New York.
Speaking at an American Chamber of Commerce lunch in Brisbane last week, Queensland Investment Corporation chief economist Matthew Peter outlined a nightmare scenario in which Australia could become a "banana republic".
Dr Peter said the QIC had modelled the effect Trump's policies, such as tariffs on Chinese and Mexican imports, would have in Australia.
Unemployment would rise to about 7 per cent, Dr Peter said, and the Australian dollar would fall to US60¢.
In what Dr Peter described as a "horror story", Australia's GDP would also fall 1 per cent over four years.
"We've done a fair bit of modelling on this, but we don't know exactly what he's going to do," he said.
At the centre of Trump's protectionist policies, Dr Peter said, was a 45 per cent increase in cross-border tariffs on Chinese products and 30 per cent in Mexico.
"Anything around that sort of measure, which was retaliated by China and Mexico, would be pretty damaging," he said.
"In our simulation, we find that would reduce growth in the US over a four-year period by two percentage points.
"For the economy, that's pretty bad stuff.
"Inflation would probably go through the roof because of the higher tariffs and ... they would probably have to raise interest rates, which would raise the US dollar and worsen the situation."
A trade war between the United States and China would result in a 5 per cent fall in the two nations' GDP, Dr Peter said.
"Australia is not immune, obviously, because even though it doesn't have very strong trade links anymore in terms of merchandise trade with the US – it's dominated by China – what we find there is we get about a 1 per cent fall in GDP over four years," he said.
"That's not as bad as China and the US because the RBA is forced to cut rates to half a per cent, the dollar falls to about 60¢ and they're strong pushing effects for the Australian economy and that enables us to see through some of the worst parts of the trade shock.
"But, nonetheless, you'd expect the unemployment rate to hit something like 7 per cent in that type of scenario, so it would be pretty bad news for us."
Dr Peter said there would also be a loss of confidence in the Australian economy and investments.
"We'd move from this safe-haven type economy to, dare I say it, a banana republic," he said.
"So that's the horror story, but I don't think that's going to happen. There's not going to be that type of shock."
The likelihood that Mr Trump's actions would not match his campaign rhetoric provided some relief, Dr Peter told the luncheon at the Pullman Hotel, which focused on the first 100 days of the Trump presidency.
"With the constraints we think Trump is going to face in terms of implementing any of this grandiose plan, we think it's going to be a little bit of a fizz," he said.
0 comments
New User? Sign up