RBA warns of Trump inflation threat.

February 17, 2018

AFR 17/2/18

  • Reserve Bank of Australia governor Philip Lowe has slammed as "very problematic" the inflationary forces being unleashed by Donald Trump's unprecedented borrowing surge to fund company tax cuts, saying they are landing on a US economy already running at full tilt.

  • Dr Lowe warned that financial markets "can turn against you" fast if governments overreach in borrowing to fund tax cuts, warning the Coalition government against blowing its planned return to surplus by 2020-21.

  • Dr Lowe's remarks come after weeks of sudden global financial turmoil erupted over fears the US economy could be on the brink of a surge in inflationary pressures that would force up interest rates, making many asset prices look excessive.

  • Surging borrowing costs globally would threaten to drag Australia's financial system in the same direction, given more than half of the nation's supply of wholesale mortgages are sourced offshore. Any unexpected increases in the cost of borrowing would upend Australia's economic rebound by sending debt-laden consumers – already suffering ultra-low wages growth – into a defensive crouch (crunch?).

 

http://www.afr.com/news/economy/monetary-policy/rba-head-philip-lowe-rings-alarm-over-trump-inflation-threat-20180216-h0w716

 

 


 

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