Trade wars pose ‘significant risk’: RBA’s Lowe

The Reserve Bank of Australia’s governor, Philip Lowe, used his speech to the House of Representatives Standing Committee on Economics to highlight the “significant risk” trade and technology disputes between the United States and China pose to the local and global economy.

While Lowe commented that there are signs the Australian economy has reached a “gentle turning point”, he pointed to the “considerable uncertainty” for many businesses around the world created by the disputes between the world’s two largest economies.

“Worryingly, this uncertainty is leading to investment plans being postponed or reconsidered. It is also now generating volatility in financial markets and has increased the prospects of monetary easing in many countries. This means that we have a lot riding on these disputes being resolved,” Lowe said on Friday during an opening statement to the House of Reps committee.

Lowe also used the occasion to address the RBA’s historically low interest rates and future monetary policy discussion, including mention that it is reasonable to expect an extended period of low interest rates in Australia, which he added is a reflection of what’s happening both overseas and locally.

US President Donald Trump has continued to ramp up tariffs on Chinese goods in recent weeks while China has responded by devaluing its currency, the yuan.

Lowe pointed to the volatility the trade disputes between China and the US is generating in financial markets, a factor he said has increased the prospects of monetary easing in many countries.

“This means that we have a lot riding on these disputes being resolved,” he said.