On June 3, 2025, Sarah Hunter, the chief economist at the Reserve Bank, addressed the Economic Society of Australia's Queensland branch in Brisbane, discussing the potential structural changes to the global economy due to tariffs.

In response to these concerns, the Reserve Bank recently cut interest rates, fearing that rising tariffs could push Australia into recession and potentially lead to the loss of up to 200,000 jobs.

Hunter identified five channels through which Trump's trade policies would disrupt the economy, including realignment of trade flows and changes in consumer spending.

Market expectations suggest there is an 80% chance that the Reserve Bank will further cut the official cash rate from 3.85% to 3.1% in its upcoming July meeting.

Hunter highlighted that Donald Trump's tariff policies are likely to lead Australians to save more and spend less, impacting both households and businesses.

She emphasized that increased borrowing costs and risk premiums in global financial markets would likely hinder domestic markets and further slow economic activity.

She indicated that adjustments to both interest rate settings and government spending may be necessary to address the fallout from tariffs, which could affect global assets like shares and currencies.

She noted that this uncertainty from tariffs could cause a shift in priorities, with households and businesses focusing on saving rather than spending and investing.

Hunter's comments come on the heels of the ISM manufacturing index release, which indicated a decline in the American economy for four consecutive months, signaling contraction linked to tariff effects.

Matthew Martin, a senior economist at Oxford Economics, added that higher input costs and supply disruptions are making businesses hesitant to place new orders, raising the risk of layoffs.