Michael Blythe | August 13 , 2025
The US trade policy has become a central economic focus and a key driver of uncertainty. In his latest inFocus piece, Michael Blythe discusses the effects of higher tariffs and the expected impact on the Australian economy.
The report explores whether monetary and fiscal policies are still effective. Blythe assesses the RBA’s delayed response in joining the global trend of lowering interest rates and highlights Australia’s current fiscal policy challenges.
Key discussion points:
US trade policy is the central economic focus and key driver of uncertainty.
The consensus is that the impact of higher tariffs on the Australian economy will be limited.
Key drivers are a relative tariff advantage, China trade diversion and stimulus, and the flexible AUD.
Australia has scope to ease policy settings – but there are signs that policy stimulus is losing traction.
A positive productivity outcome from the upcoming Economic Reform Roundtable is essential.
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