(Bloomberg) -- Australia faces the threat of short-term economic pain in the form of reduced output and further inflation pressures as a result of incoming US President Donald Trump’s policy agenda, according to Treasurer Jim Chalmers.
Revealing the findings of Treasury modeling undertaken in anticipation of a Trump win, Chalmers said while there would be a “small reduction in our output and additional price pressures,” the features of Australia’s economy would leave it better off compared to other nations.
“The timing of this, and the responses and ramifications that might follow – what economists call second-round effects – are difficult to predict,” Chalmers will say in a speech tonight, according to extracts provided in advance by his office. “But we wouldn’t be immune from escalating trade tensions that might ensue.”
Anxious to avoid the panicked scrabbling which followed Trump’s election in 2016, the Australian government has been working behind the scenes to build bridges to the former President’s team in advance of his election win last week.
Foreign Minister Penny Wong met with Trump’s former Secretary of State Mike Pompeo in Washington during her visit in October, while Chalmers sat down with the former president’s economic adviser Scott Bessent, who has been flagged as a potential treasury secretary in the administration.
The government also commissioned Treasury modeling on the potential impacts of a second Trump administration, or the election of Vice President Kamala Harris.
Chalmers said the Australian government was “well placed and well prepared” to navigate the change in Washington, but with the center-left Labor party facing a tough battle to re-election within six months, small changes in the economic outlook could be highly significant.
The latest Newspoll survey released on Sunday revealed Labor is trailing the Liberal-National coalition on voting intention 49% to 51%, the same as three weeks ago, amid voter frustration over high inflation, a national housing crisis and interest rates which sit at a 13-year high.