Reserve Bank of Australia forecasts unemployment to hit 6% if trade tensions intensify

According to the quarterly statement on monetary policy of the Reserve Bank of Australia (RBA), the regulator suggests that unemployment in the country would rise to almost 6% in 2026 in case of the US tariff reintroduction.

The central bank forecasts that inflation would then fall to around 2% by the end of 2026, compared with the baseline forecast of 2.6%. Economic growth would also suffer and come in more than 3% lower by mid-2027 compared to the baseline scenario, which sees GDP growth increasing throughout 2025 and 2026.

The RBA's downside scenario assumes an 85 basis point monetary policy easing by mid-2027, as is indicated by current money market pricing.

According to the regulator's officials, the US rate hike will generally have a disinflationary impact on Australia. However, a stronger pace of price growth is not ruled out in case of prolonged trade frictions spreading to a larger share of global trade.