Finance guru Mark Bouris has issued a stark warning that a US recession would have a butterfly effect on Australia’s economy.
The warning comes as economists hold their breath in anticipation of Donald Trump‘s new 25 per cent tariffs on Australian agricultural and pharmaceutical exports, coming into effect on Wednesday.
The businessman said that the impact could be ‘messy’, not only for the US but for global trading partners like Australia.
‘We don’t know what is going on,’ Bouris told Channel Seven‘s Sunrise program.
‘If the [US] go into recession, so will we. The rest of the whole world will.’
The finance guru described a scenario in which the US applies tariffs, which causes countries like Canada, the UK and China to increase their own.
‘So we’ve got a world of everybody fighting a tariff war and if we have something like a big tariff war, the whole world will go into an inflationary cycle, and that inflationary cycle will create a massive amount of problems,’ he said.
Bouris suggested that even for Trump’s own economy, this could be a ‘really messy period’ with major unemployment also a threat after US government lay-offs.
Finance guru Mark Bouris (pictured) has issued a stark warning that a US recession would have a butterfly effect on Australia’s economy
Donald Trump (pictured) is applying a new 25 per cent tariffs on Australian agricultural and pharmaceutical exports, which comes into effect on Wednesday
Before the measures have landed, there has already been a ripple-effect in Australia.
The Reserve Bank left the cash rate on hold at 4.1 per cent on Tuesday, declining to cut rates like it did in February while citing the upcoming American import tariffs.
‘On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures,’ the board said.
‘Geopolitical uncertainties are also pronounced. Inflation, however, could move in either direction.
‘Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.’
Governor Michele Bullock said the RBA was doing a ‘scenario analysis’ to predict how China, Australia’s biggest trading partner, would react to the US tariffs.
‘What will be important for us is particularly what happens with our major trading partners and China,’ she told reporters in Sydney.
‘We do know what to be worried about. A trade war with escalating tariffs and reciprocal tariffs is going to slow down the growth in world trade and Australia as a small, open economy has benefited massively from open trade.’
Michele Bullock (pictured on Tuesday) said the RBA was doing a ‘scenario analysis’ to predict how China, Australia’s biggest trading partner, would react to the US tariffs
Bouris said he is expecting two rate cuts in 2025, with the first already issued in February.
‘My guess is… if she sees two quarters of low inflation – that is not the headline inflation but underlying inflation below 3 per cent – she will consider a rate cut,’ he said.
The Reserve Bank on Tuesday tried to downplay expectations of more relief for borrowers.
‘The board is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome,’ it said.
Headline inflation at 2.4 per cent sits in the middle of the RBA’s 2 to 3 per cent target, thanks to $300 electricity rebates that are now being extended.
The RBA’s next decision on May 20 will be made after the release of March quarter inflation data.
