Global trade uncertainty has returned to the spotlight, following a rollercoaster week of US tariff announcements and reversals.
After initially flagging reciprocal tariffs, US President Donald Trump stunned markets by announcing a 90-day suspension on the proposed measures.
For now, Australia’s direct exposure to these US tariffs remains limited — exports to the US account for only around 4% of total Australian exports, and a 10% tariff rate has been set as a temporary baseline.
But according to Eleonor Creagh (pictured), PropTrack senior economist, the real concern lies in the indirect effects.
“Despite recent signs of moderation, global trade tensions remain a material risk to the economic outlook, and Australia is not immune,” Creagh said.
The escalation of tariffs on Chinese goods to 145% underscores the geopolitical tensions likely to weigh heavily on global growth — with flow-on impacts for Australia through reduced confidence, investment, and hiring.
While Australia may be spared the brunt of direct tariffs, the threat of a global economic slowdown raises red flags for local businesses — especially those in export-focused sectors.
“A prolonged trade conflict may cause firms to delay investment and hiring,” Creagh said, “with knock-on effects for the broader labour market.”
In this climate, rising unemployment or even the fear of job loss could prompt households to delay major financial decisions, including home purchases.
One offsetting factor in this uncertain environment is monetary policy. The Reserve Bank cut rates in February, with further reductions expected.
The four major banks forecast rate cuts starting in May, with NAB predicting five cuts to 2.60% by February 2026, while CBA, Westpac, and ANZ each foresee three cuts to reach a 3.35% cash rate by year-end.
Lower borrowing costs typically fuel demand by increasing borrowing power and improving affordability — which, in turn, supports home prices.
“Lower rates reduce borrowing costs, typically supporting home-buying demand and allowing home buyers to take on more debt and bid up prices,” Creagh said.
Investor behaviour may also shift, with property perceived as a safer haven amid financial market turbulence. If sellers hold back due to uncertainty, constrained housing supply could further pressure prices upward.
While global risks loom, the resilience of Australian mortgage holders is a crucial stabiliser.
“RBA data shows that less than 1% of households are in negative equity,” Creagh said.
Most borrowers have substantial equity, with loan-to-valuation ratios under 80% — and many significantly lower. This financial buffer means that even in the case of income loss, many households could sell without incurring a loss, reducing the likelihood of forced sales.
However, Creagh cautioned that “risks are elevated for recent borrowers with high debt levels and thinner buffers.”
Structural tailwinds continue to support demand — from still-solid population growth to ongoing housing undersupply — yet affordability remains a major headwind. Price growth is expected to continue in 2025, but at a more moderate pace.
“The housing market is likely to remain supported by lowering interest rates, constrained supply, and high equity buffers — but downside risks are there to monitor,” Creagh said.
While Trump’s 90-day tariff suspension removed one immediate threat, Australia’s economic trajectory will remain sensitive to global developments.
For now, RBA’s rate cuts and the financial resilience of households provide stability — but continued vigilance is needed as trade tensions and economic uncertainty linger.
