The US presidency of Donald Trump won’t have the big impact on Australia some news headlines suggest, according to the latest analysis by Deloitte Access Economics.
Economist Chris Richardson says that just because something is on the front page it doesn’t necessarily mean that it is big news for businesses.
Among the reported risks to Australia from a Trump presidency are an escalation in inflation, a trade war with China and a rise in tariffs, restricting access to the US market.
“The US presidency is rather less powerful than popular opinion would have it, and actual policy change is likely to prove to be a small fraction of what has been foreshadowed in the campaign,” he says.
“That said, there are Republican majorities in both houses of Congress, and presidential power is at its strongest with respect to foreign policy. That suggests policy change is now more likely in some areas.”
Examples relevant to Australia include trade, climate policy and, perhaps, foreign policy more generally.
“Businesses will be winners and losers from those changes — and the same is true of the (Australian) Federal Budget,” says Richardson.
He says the election of Trump is a bigger shift in the global and Australian dial than Brexit, when the UK voted to leave the European Union.
“Equally, however, you shouldn’t panic,” he says.
“Most of the short term reactions have been over the top. The business implications of a Trump presidency are likely to prove smaller and slower than the headlines of recent days would otherwise suggest.”
Deloitte Access Economics’ Budget Monitor says Australia’s revenues in 2016-17 and 2017-18 will be down. It’s forecasting an underlying cash deficit of $40.49 billion this financial year, $3.37 billion worse than budget.
The shortfall versus official estimates worsens in 2017-18.
“Although the cost of Senate delays eases (as we make the devil-may-care assumption that savings pass parliament by mid-2017), the costs to revenue accelerate,” says Richardson.
“There are challenges seen on almost every front: underperformance on wages and jobs is forecast to continue, we see shortfalls creeping back in on company tax, super may also fall shy, and GST may do the same.”
Deloitte Access Economics is forecasting a cash underlying deficit of $29.9 billion in 2017-18, a bottom line $3.8 billion worse than budget.
Australia’s mid-year budget update, MYEFO, is due to be released next month.