Donald Trump’s election win to push up inflation, dent GDP: Chalmers

Treasurer Jim Chalmers is warning that Donald Trump’s return to the White House risks pushing up inflation in Australia and denting the nation’s GDP.

Dr Chalmers says Australia will not be immune from US-China trade wars that could erupt if Mr Trump delivers his promised tariffs.

The Federal Government is preparing for a period of major political and economic upheaval after Mr Trump’s stunning US election win.

Mr Trump’s aggressive America-first agenda includes slapping tariffs on foreign goods, including of up 60 per cent on imports from China.

Ahead of the election, Dr Chalmers tasked the Treasury with modelling different trade and tariff scenarios to help the Federal Government prepare for a second Trump presidency.

In a speech on Monday night, the Treasurer will reveal the modelling showed Australia’s economy would not emerge unscathed.

“In short, Treasury’s analysis demonstrated that we should expect a small reduction in our output and additional price pressures, particularly in the short term,” Dr Chalmers will tell an Australian Institute of International Affairs dinner.

“But specific features of our economy — like a flexible exchange rate and independent central bank, would help mitigate against some of this.

“Globally – the impact was much more substantial.”

Dr Chalmers said scale of the global impact was harder to predict but warned Australia “wouldn’t be immune from escalating trade tensions that might ensue”.

The prospect of a Donald Trump-fuelled uptick in prices is a blow for Prime Minister Anthony Albanese, who just last week was optimistic the worst of the years-long inflation storm had passed.

Labor is banking on at least one interest rate cut ahead of the next Federal election to boost its hopes of a second term.

Mr Albanese and senior ministers have reiterated Australia should expect major change after Mr Trump campaigned on shaking up the status-quo.

Dr Chalmers will echo that line on Monday night while emphasising the Federal Government is “well placed and well prepared” to weather the uncertainty.

“Nobody should underestimate our ability to make it work,” Dr Chalmers will tell the event.

During his pre-US election trip to Washington, Dr Chalmers held talks with Scott Bessent, one of the frontrunners to serve as Trump’s treasury secretary.

The US election result will have ramifications for international action on climate change, with Mr Trump reportedly poised to withdraw from the Paris Agreement just as he did in his first term in the Oval Office.

Such a move would be seen as a major blow to the global effort to limit temperature rise to 1.5C, given the US is the world’s second largest polluter behind China.

Health Minister Mark Butler, a former shadow climate change minister, said it would not be a surprise if Mr Trump abandoned the Paris pact.

But he played down the implications for the shift to net zero, even predicting Australia could benefit if investment shifted away from America.

“It won’t stop the global investment shift, which is very much in the direction of net zero technology, whether that’s in energy or in vehicles,” Mr Butler told Sky News on Sunday.

“So, perhaps there’s an upside for us in terms of the investment shifting a bit more away from the US than it has under Joe Biden’s term.”