This is wrong.
Apostle Funds Management portfolio manager John Barrasso says having Trump in the White House will keep mortgage rates higher for longer, with no immediate relief from inflation.
“A strong American economy and a stable or improving Australian one is likely to result in a higher level of inflation than the RBA expected,” he says. “This will imply that interest rates will remain higher for longer.”
“Australian consumers and mortgage holders appear to be weathering elevated interest rates, and I believe that as long as employment remains strong, this can persist,” he says.
It would be hard to be more wrong.
Australian households are not “weathering elevated interest rates”. They have been annihilated by them.
Due to widespread immigration, household formation has compensated for their shocking weakness.
As for Trump’s policies and interest rates, they are bad for sovereigns but good for households.
Higher yields for duration mean governments pay more for debt.
However, every exporter on earth is about to be curbed or cut off from American demand and will fight for market share everywhere else.
This will mean lower inflation and interest rates for the shorter-duration markets that set local interest rates in Australia.
As well, Chinese growth will be hammered and stimulus will not be commodity-intensive.
A higher US dollar will also punish wider EM growth, which is a significant consumer of commodities.
Europe is stuffed and Russian peace may return its commodities to markets too.
Some have got the right idea.
GSFM market strategist Stephen Miller said tariffs on China would weigh on local employment and economic growth.
…Barrenjoey economists Jo Masters and Johnathan McMenamin said there was a risk that Trump’s tariffs would push down inflation outside the US, as Asian manufacturers diverted a glut of supply to new markets, including Australia. Even if China resorted to fiscal stimulus, it was still highly likely that Chinese economic growth would slow due to trade restrictions.
…Tim Toohey, Yarra Capital Management’s head of macro and strategy, said global tariffs would increase uncertainty in Australia and that may delay investment and employment decisions.
“For the RBA, it will depend if they see it as a global growth hit or more inflationary, but our analysis suggests it’s more of a hit to global uncertainty and the need for the RBA to be a bit more pre-emptive at the margin [in cutting interest rates].”
Correct. Unless the bullhawkian idiocy persists. Which is always a chance:
Treasurer Jim Chalmers has warned that Australia will suffer from lower economic growth and higher prices because of Donald Trump’s policies, making Labor’s bid for reelection even harder in a contest that will be dominated by the cost of living.
Dills govern us.
