RBA’s Sarah Hunter expects US tariffs to weigh on Australia’s economic growth

Reserve Bank of Australia Assistant Governor Sarah Hunter says global trade uncertainty will weigh on domestic economic growth and employment. Hence, the regulator switched to monetary easing in May. At the moment, financial markets project three more RBA rate cuts this year. 

The central bank has shifted its focus from keeping inflation within the target range of 2–3% to a possible slowdown in GDP driven by US tariffs. Wednesday’s data is likely to show a weak expansion in Australia's economy in the first quarter of 2025, Bloomberg reports.

Sarah Hunter says the RBA will monitor global trade flows and inflation in the coming months. The official believes Australia is well-positioned to handle the fallout from Trump’s tariff policy, as exports to the US account for around 1.5% of the country’s GDP. This share is very low compared to other nations. 

However, global trade tensions could have a stronger impact on Australia’s services sector. This segment tends to be more responsive to changes in the exchange rate and global demand, Hunter notes.