Australia’s central bank is prepared to take decisive action if proposed U.S. tariffs impact global trade and threaten the country’s economic growth, according to a statement made by a senior official on Wednesday. This announcement follows the Reserve Bank of Australia’s (RBA) surprising decision to signal a potential easing of monetary policy.

In a speech delivered in Sydney, RBA Deputy Governor Andrew Hauser noted that while the immediate effects of U.S. tariffs on Australia might be limited—given that Australia maintains a trade deficit with the United States—the broader implications largely depend on reactions from China. He mentioned that any stimulus measures from Australia’s biggest trading partner could potentially enhance economic activity in Australia.

However, Hauser cautioned that a worst-case scenario involving a full-blown global trade war could substantially disrupt global economic activity and trade flows. He emphasized that the RBA is committed to closely monitoring developments and is ready to respond vigorously if necessary to ensure low and stable inflation alongside sustained employment levels.

Despite maintaining steady interest rates at 4.35% for over a year, the RBA shifted to a more dovish stance this week, which has increased market expectations for a potential easing in February, driven by weaker-than-anticipated economic growth. Hauser characterized the effects of the U.S. tariffs on inflation in Australia as uncertain and capable of moving in either direction.

He expressed confidence in Australia’s resilience, stating that the chances of the country slipping into another global depression are minimal due to its strong comparative advantages in raw materials and services. Furthermore, he highlighted Australia’s ability to adapt its trading relationships and the effectiveness of its flexible exchange rate and independent monetary policy as buffers against economic shocks.

This perspective reflects an optimistic outlook for Australia’s economy. While uncertainties loom due to potential global trade tensions, the RBA appears equipped to navigate challenges and seize opportunities that arise from shifts in international trade dynamics.

In summary, the RBA is poised to act decisively in response to global trade challenges, focusing on maintaining economic stability and growth even in uncertain times.