<?xml version="1.0" encoding="ISO-8859-1"?> <docID>338770</docID> <postdate>2025-02-21 12:05:07</postdate> <headline>Small dent from US tariffs but inflation impact unclear</headline> <body><p><img class="size-full wp-image-338771" src="https://citynews.com.au/wp-content/uploads/2025/02/20250221139091801635-original-resized.jpg" alt="" width="900" height="600" /></p> <caption>RBA Governor Michele Bullock is facing a parliamentary grilling over the decision to cut rates. (Lukas Coch/AAP PHOTOS)</caption> <p><span class="kicker-line">By <strong>Kat Wong</strong> and <strong>Jacob Shteyman</strong></span></p> <p><strong>The impact of US tariffs are factored into the Reserve Bank's forecasts but Australia is less vulnerable than other countries, federal politicians have been told.</strong></p> <p>Australia's gross domestic product will be impacted negatively by America's 25 per cent tariffs on steel and aluminium, but the central bank assures it will be "relatively small".</p> <p>"We're not as exposed as other countries," assistant governor Sarah Hunter told a parliamentary inquiry on Friday.</p> <p>"Tariffs can have really dislocating impacts in the short term, and that's what can generate these big downturns in their economy, and have implications both for GDP and for inflation.</p> <p>"Here, our trade patterns are different."</p> <p>Australia has relatively low tariffs and trade barriers, and in the past the exchange rate has been a "substantial" buffer. This means the impact of the US tariffs, which come into effect in March, depends on how it plays out with other countries.</p> <p>The Reserve Bank is expecting a further escalation with China but if Beijing can no longer export to the US, they might choose to engage in cheaper trade elsewhere and Australia could benefit.</p> <p>The impact of the tariffs on inflation is unclear, but the central bank's governor warned uncertainties and unexpected strength plagued the economic outlook.</p> <p>Michele Bullock said inflation had slowed more than expected, convincing the board it was appropriate to slightly ease monetary policy for the first time in four years.</p> <p>"We can be satisfied with the progress made so far, though the job is definitely not done," she said.</p> <p>"The economic outlook remains uncertain and this is especially so the further we look into the future."</p> <p>Data released by the Australian Bureau of Statistics on Tuesday shows the labour market remains remarkably resilient, with an extra 44,000 jobs added to the economy in January.</p> <p>While strong employment growth is good news for jobseekers, it leads to uncertainties over how much capacity there is in the labour market.</p> <p>"We are alert to the possibility that it is signalling a bit more strength in the economy, which could delay or derail the disinflation process," Ms Bullock said.</p> <p>Questions have also been raised over the lag between changes to monetary policy and their impact on the economy.</p> <p>The RBA's board recognised Australian households, particularly those with mortgages, have been particularly burdened and noted high inflation had permanently increased prices.</p> <p>"This has hurt everyone, but particularly those on lower incomes and more vulnerable," Ms Bullock said.</p> <p>"We've made good progress on inflation, however, and the board needs to be confident that it is returning to change sustainably."</p> <p>Some economists argue the board was too premature in cutting rates, such as University of NSW professor Richard Holden who says underlying inflation is still too high.</p> <p>But RBA deputy governor Andrew Hauser said the decision to cut was not a "slam dunk", as the market had expected.</p> </body>