Angus Livingston and Matt Coughlan
(Australian Associated Press)
The trade war between China and the United States is hurting Australia’s stock market and both sides of politics want “cool heads” to ease the tension.
The US Treasury Department has accused China of currency manipulation after the yuan was devalued this week to its lowest level in more than a decade.
The move rattled financial markets in Australia and abroad, but local shares were trading higher on Wednesday after Wall Street clawed back some losses overnight.
US President Donald Trump announced last week he would slap a 10 per cent tariff on a further $US300 billion in Chinese imports from September 1.
“We shouldn’t overreact to these developments, but we should recognise that China’s currency moves and the increase in the US tariffs are an unwanted escalation,” Treasurer Josh Frydenberg told ABC radio on Wednesday.
“These are concerning developments and our message is to continue to encourage cool heads to prevail and for differences between China and the US to be negotiated between the parties.”
Labor leader Anthony Albanese met with US officials this week and also urged them to let cool heads reduce the tension.
“The danger for Australia here is escalation in the conflict over trade between the US and China (that) sees us as collateral damage,” Mr Albanese told reporters in Melbourne.
But Labor warns the government can’t pretend trade tensions are the reason for a stagnant domestic economy.
“Slow growth, stagnant wages, declining living standards, high household debt, they didn’t just emerge overnight. They can’t be explained away by global conditions,” shadow treasurer Jim Chalmers told reporters in Brisbane.
Mr Frydenberg said the coalition government was stimulating the economy with income tax cuts and infrastructure spending.
But Mr Chalmers said the spending was mostly years away, and the economy was struggling right now.
The Reserve Bank on Tuesday held the cash rate at a record low one per cent amid what governor Philip Lowe called “increased” uncertainty for the global economy.
But Mr Frydenberg says the local economy is still tipped to grow at 2.5 per cent this year, arguing that low interest rates are becoming more common across the globe.
“This is a new phenomenon, where we’re seeing low inflation, relatively low unemployment, as well as very low interest rates,” he told Sky News.
Mr Frydenberg also downplayed risks to Australians’ retirement savings after former treasurer Peter Costello warned superannuation and the budget’s bottom line could be hit by uncertainty in the global economy.
“People who have had super and money in managed funds have done much better than if they had money in the bank,” Mr Frydenberg said.
“We’ll still deliver a surplus next year and we’re absolutely determined to do that.”