Jim Chalmers warns of ‘dark shadows’ over global economy after rates cut

Jim Chalmers has warned of “dark shadows” looming over the global economy just days after the Reserve Bank of Australia cut interest rates for a second time this year.

The RBA this week confirmed market predictions and delivered a 0.25 percentage point cut, bringing the official cash rate to 3.85 per cent.

It was welcome news for mortgage holders, many of whom could save hundreds on monthly repayments.

Appearing on a podcast on Wednesday afternoon, the Treasurer said the RBA’s decision was “very good news” and showed the Albanese government’s efforts to put downward pressure on inflation were working.

But Mr Chalmers warned it also recognised “this very uncertain global economic environment”.

“The language that the Reserve Bank governor used yesterday and that the board used in their statement is not dissimilar to some of the things that I’ve been saying for some time now,” he told The Conversation’s Politics with Michelle Grattan.

“The escalating trade tensions, the weakness in the Chinese economy, conflict in the Middle East and Eastern Europe, all of these things are casting a dark shadow over the global economy, and that has implications for us as well.”

US President Donald Trump last month included Australia in blanket 10 per cent tariffs on most goods despite a trade surplus in the US’s favour.

It dealt a fresh blow to Canberra’s relationship with Washington, which was already bruised on the back of Australia’s inclusion in 25 per cent tariffs on steel and aluminium.

But two-way trade is just one cause for concern – the Trump administration’s imposts have caused grief for Australia’s other key trading partners, including China.

With the Chinese economy slowing down, conflicts raging on multiple continents, and US tariffs and counter-tariffs straining global trade and traditional alliances, many expert – including RBA governor Michele Bullock – have not ruled out a recession in Australia.

Mr Chalmers noted that both the Reserve Bank and the Treasury “expect our economy to continue to grow” over the next financial year but again repeated the “international environment is casting a dark shadow over the global economy and our own economy”.

“And that’s why it’s so important that the Australian economy has got the characteristics that you would want going into this volatility and unpredictability – the lower inflation, the higher wages, the low unemployment, the budget is in better nick than most countries around the world, we’re starting to see interest rates come down, the market’s expecting further interest rate cuts,” he said.

More to come