Australia's Central Bank Ready to Respond to US Tariffs

Australia's central bank, the Reserve Bank of Australia (RBA), has reassured the public that it is prepared to respond to potential US tariffs that could impact global trade and inflation. In a speech delivered in Sydney, RBA Deputy Governor Andrew Hauser emphasized that the bank is ready to act "with force" to meet its mandate of low and stable inflation with sustained full employment.

The RBA's flexible exchange rate and independent monetary policy serve as powerful shock absorbers, allowing it to mitigate the effects of external shocks like US tariffs. Hauser acknowledged that the impact of US tariffs on Australian inflation is ambiguous and could move in either direction. However, he expressed confidence in the country's strong comparative advantages in raw materials and services, as well as its track record of nimbly reshaping trading relationships.

The RBA's commitment to being alert to developments and ready to respond in either direction, with force if needed, demonstrates its resolve to maintain economic stability in the face of potential challenges. This proactive approach is crucial for Australia, given its deep trade ties with China and its reliance on the export of commodities such as iron ore, coal, and liquefied natural gas.

In addition to the RBA's preparedness, the Australian government can also play a role in complementing the central bank's response to US tariffs. Fiscal measures such as targeted assistance to affected industries, infrastructure projects, and policies to encourage domestic consumption and investment can help offset any negative impacts from the tariffs.



Ultimately, Australia's central bank and government are working together to ensure the country's economic resilience in the face of potential US tariffs. By being proactive and prepared, they aim to maintain low and stable inflation, sustained full employment, and overall economic growth.