Finance guru Mark Bouris has issued a stark warning that a US recession would have a butterfly effect on Australia’s economy.
The warning comes as economists hold their breath in anticipation of Donald Trump’s new 25 per cent tariffs on Australian agricultural and pharmaceutical exports, coming into effect on Wednesday.
The businessman said that the impact could be ‘messy’, not only for the US but for global trading partners like Australia.
‘If the [US] go into recession, so will we. The rest of the whole world will,’ Bouris told Channel Seven’s Sunrise program.
The finance guru described a scenario in which countries like Canada, the UK and China increase their own tariffs in response to those imposed by the US.
‘So we’ve got a world of everybody fighting a tariff war and if we have something like a big tariff war, the whole world will go into an inflationary cycle, and that inflationary cycle will create a massive amount of problems,’ he said.
Bouris suggested that this could be a ‘really messy period’ with major unemployment also a threat after US government lay-offs.
Finance guru Mark Bouris (pictured) has issued a stark warning that a US recession would have a butterfly effect on Australia’s economy
Donald Trump (pictured) is applying a new 25 per cent tariffs on Australian agricultural and pharmaceutical exports, which comes into effect on Wednesday
Before the measures have landed, there has already been a ripple effect in Australia.
The Reserve Bank left the cash rate on hold at 4.1 per cent on Tuesday, declining to cut rates like it did in February while citing the upcoming American import tariffs as a factor invoking caution.
‘Recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures,’ the board said.
‘Geopolitical uncertainties are also pronounced. Inflation, however, could move in either direction.
‘Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.’
Governor Michele Bullock said the RBA was doing a ‘scenario analysis’ to predict how China, Australia’s biggest trading partner, would be affected by the US tariffs and how it would respond.
‘We do know what to be worried about. A trade war with escalating tariffs and reciprocal tariffs is going to slow down the growth in world trade and Australia as a small, open economy has benefited massively from open trade,’ the RBA chief said.
Bouris said he is expecting two rate cuts in 2025, with the first already issued in February.
‘My guess is… if she sees two quarters of low inflation – that is not the headline inflation but underlying inflation below 3 per cent – she will consider a rate cut,’ he said.
The Reserve Bank on Tuesday tried to downplay expectations of more relief for borrowers.
‘The board is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome,’ it said.
Headline inflation at 2.4 per cent sits in the middle of the RBA’s 2 to 3 per cent target, thanks to $300 electricity rebates that are now being extended.
The RBA’s next decision on May 20 will be made after the release of March quarter inflation data.
Australia hasn’t experienced a recession since the 2020 Covid lockdowns that followed the summer bushfires.
That occurred 29 years after the 1991 recession, the last major downturn sparked by aggressive interest rate hikes.
Australia’s economy last year grew by just 1.3 per cent.
But in the year to September 2024, the 0.8 per cent growth pace was the weakest since the 1991 recession outside of Covid, following the RBA’s 13 rate rises in 2023 and 2024.
