Finance Guru Mark Bouris has given a grim warning that an American recession would have a butterfly effect on the Australian economy.
The warning comes as economists in expectation of the new 25 percent rates of Donald Trump for Australian agricultural and pharmaceutical exports, which will come into effect on Wednesday.
The businessman said that the impact could be 'messy', not only for the US, but also for global trading partners such as Australia.
“We don't know what's going on,” Bouris told the Sunrise program of Channel Seven.
'If the [US] Go to a recession, just like us. The rest of the whole world will do it. '
The financial guru described a scenario in which the US applies rates, which increases countries such as Canada, the UK and China.
“So we have a world of everyone fighting a tariff war and if we have something like a big rate war, the whole world will go into an inflatory cycle, and that inflationary cycle will cause an enormous amount of problems,” he said.
Bouris suggested that even for Trump's own economy, this could be a 'really messy period' with great unemployment, also a threat after dismissal from the US government.
Finance Guru Mark Bouris (photo) has given a grim warning that an American recession would have a butterfly effect on Australia's economy
Donald Trump (photo) applies a new rates of 25 percent for the Australian agricultural and pharmaceutical exports, which will take effect on Wednesday
Before the measures have landed, there has already been a wrinkle effect in Australia.
The Reserve Bank left the cash rate on 4.1 percent on Tuesday and refused to lower the rates as in February while quoting the upcoming American import rates.
“At the front of the macro -economic policy, recent announcements from the United States have rates worldwide influence trust and this would probably be strengthened if the scope of rates broadens or taking other countries,” the board said.
'Geopolitical uncertainties are also pronounced. However, inflation can move in both directions.
“Many central banks have facilitated monetary policy since the beginning of the year, but they have increasingly become attentive to the developing risks of recent global policy developments.”
Governor Michele Bullock said the RBA did a 'scenario analysis' to predict how China, the largest trading partner in Australia, would respond to American rates.
“What will be important for us is in particular what happens to our most important trading partners and China,” she said reporters in Sydney.
'We know what we should worry about. A trade war with escalating rates and mutual rates will slow down the growth in world trade and Australia as a small, open economy, has benefited enormously from open trade. '
Michele Bullock (depicted on Tuesday) said that the RBA did a 'scenario analysis' to predict how China, the largest trading partner in Australia, would respond to the American rates
Bouris said that in 2025 he expected two tariff reductions, with the first already published in February.
“My gamble is … If she sees two quarters of low inflation – that is not head inflation but underlying inflation below 3 percent – she will consider a rate reduction,” he said.
The reserve bank tried to trivialize the expectations of more help for borrowers on Tuesday.
“The board is determined in its determination to give back inflation sustainably to focus and will do what is needed to achieve that outcome,” said it.
Headline inflation is 2.4 percent in the middle of the target of 2 to 3 percent of the RBA, thanks to $ 300 electricity discounts that are now being extended.
The next decision of the RBA on May 20 will be taken after the release of the intersection data of March quarter.
