Trump’s victory in the US election could strike a blow to Australian homeowners because his policies raise the prospect of interest rate cuts failing to materialise Down Under, economists have revealed.
The President-elect’s “America First” policies could even trigger a domino effect in the world economy that actually delivers Aussies further rate rises, some property experts claim.
Nerida Conisbee, the chief economist at Ray White Economics, said Harris and Trump’s presidencies both posed threats for Aussies, but the latter generally presented more dangers.
“Trump’s tendency towards lower taxes and pressure for lower interest rates could reignite global inflation,” she said. “This might force the Reserve Bank of Australia to raise interest rates.”
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Trump’s presidency creates some uncertainties for the Aussie economy.
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Freedom Property Investors CEO Scott Kuru said fears Trump’s policies would re-stoke global inflation had already started impacting Australia when he was still a candidate for president.
“A couple of weeks ago markets were pricing in four interest rate cuts of 0.25 per cent next year – now they’ve only fully priced in one,” Mr Kuru said.
“That’s bad news for Australians with a mortgage, as it’s likely to mean higher interest rates for longer.”
Mr Kuru said higher interest rates for longer would likely push more home buyers to cheaper outer suburbs – a trend that has been persistent since rates first increased in 2022.
A potential US-China trade war could also be a negative for the Aussie economy, and in turn local property markets, Mr Kuru said.
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Higher interest rates have spurred demand for cheaper real estate. Picture: Julian Andrews
“If China can’t get plenty of cheap products into the US market any more, they’re probably going to need less of our resources like iron ore and coal.
“That could have a big effect on property prices in places like Regional Western Australia and Regional Queensland.”
He noted that Perth property prices underperformed for years following the end of the last mining boom.
The rallying effect of Trump’s victory across numerous markets also raised the prospect of a hike in Australia.
Bond markets in the US responded quickly to Trump’s win – with American banks’ mortgage rates often keeping in tandem with increases in bond yields, such as those seen since the election.
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China President Xi Jinping and Trump may butt heads again. A lot is uncertain. Picture: Getty Images
Higher mortgage rates in the US have not always translated to higher rates in Australia, but they will give the Reserve Bank much more food for thought when contemplating the timing of a cut.
Ms Conisbee said a lot remained uncertain.
“Trump’s goal of weakening the US dollar would have mixed effects. US products would be cheaper for us to buy and the US would become a far more attractive destination for Australian tourists.
“However, it would make Australian exports more expensive in the US, and potentially reduce demand for them.
“In addition, his methods to achieve a weaker dollar remain unclear and if, for example, he has to persuade the US Federal Reserve to print more money, would likely disrupt global currency markets.”
Homeowners are already struggling with higher repayments.
Traversing all these considerations will be a tough job for the Reserve Bank of Australia, Ms Conisbee said.
Global inflation was a particular concern for Australian homeowners given it’s been the primary reason rates have remained higher for longer.
Ms Conisbee said: “Tariffs on Chinese products by the US could lead to higher inflation for Australia in a number of ways – if Chinese production declines, this could make cost of goods more expensive. Or if US products we import require Chinese inputs, this will increase the cost of US products. Similarly, if the US economy starts to overheat, we could see a spike in demand for oil, increasing global oil prices.”
Rethink Group’s Scott O’Neill, an accomplished investor and the head of a large commercial buyer’s agency, said changes in trade relations with the US could drag Australian economic growth. “That said, in the the previous four years of Trump’s presidency, trade relations between Australia were not greatly impacted.”
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