The state of the global economy
In addition to the immediate spending pressures affecting the budget, such as drought and aged care, the economy is also confronting significant global economic headwinds.
In recent months, the IMF, World Bank and OECD have all downgraded their economic forecasts for global growth.
A principal driver of these revisions has been the flow on effect of the US-China trade dispute.
Now nearly two years on, hundreds of billions of dollars of reciprocal tariffs have been placed on each other’s goods.
The US is threatening further tariffs next month which, if applied, will see the amount of trade covered by tariffs reach US$735 billion.
While this would represent tariffs covering only 4 per cent of global trade, the impact has been far more profound.
In trade wars, there are no winners, only losers.
It’s not just the protagonists who are affected, it’s the bystanders as well.
As a result of the uncertainty and instability caused by the tariff war, confidence has been hit, investment decisions have been deferred, capital flows reduced and the growth in global trade volumes severely curtailed.
Some countries are feeling the impacts more than others.
Germany, the UK, South Korea and Singapore have all experienced negative quarters of growth this year.