Hui Feng Yin Hang·2025-05-16 05:50Global Economic Impact - The 'Liberation Day' trade policy shock on April 2 has significantly weakened the global growth outlook, leading to increased uncertainty in trade policies[2][15] - US average tariff rates have reached their highest level in nearly a century, currently estimated at 17.8%[12][14] - Global growth forecasts have been revised down to 2.3% for both 2025 and 2026, with Australia's growth forecast lowered to 1.6% in 2025 and 2.0% in 2026[30][81] Australian Economic Indicators - Local inflation and unemployment rates have aligned with the RBA's February forecasts, with underlying inflation at 2.9% year-on-year in Q1 2025, falling back into the RBA's target band[40][41] - The unemployment rate remained steady at 4.1% in April 2025, indicating a tight labor market despite weaker growth indicators[41][42] - Retail sales volumes were unchanged in Q1 2025, suggesting a stall in consumer activity following the trade shock[38][43] Monetary Policy Outlook - A 25 basis point (bp) cut in the cash rate to 3.85% is expected on May 20, 2025, with a total of 100bp of cuts anticipated by Q1 2026[5][55] - The RBA's cautious approach to easing is influenced by persistent local inflation concerns rather than immediate growth worries[5][56] - The RBA is likely to provide limited guidance on future rate cuts due to high global economic uncertainty[56][58] Currency and Trade Dynamics - Modest upside for AUD-USD is anticipated as US tariffs on goods from Asia are expected to decrease, improving regional growth outlook[6][65] - The reduction in US tariffs is expected to alleviate pressure on Australia's export-dependent economy, particularly in the APAC region[65][66]