Topic: It is argued that the strong performance in Dow Jones in recent months since Donald Trump has been elected to the US president may create a significant economic impact to the rest of the world including Australia. The board of directors have asked you to brief them in a business report on the current Australian economic situation and make a forecast of its growth for the next 6 months. Based on your assessment, the board of directors would also like you to predict how the Reserve Bank of Australia may change the cash rate. Use they key macroeconomic indicators and variables to support your case.

Last year saw a new development in the United States when Donald John Trump was elected as the President of the country. As expected, he implemented his protectionist policies from the very first day of stepping into the White House. One of the most disruptive decisions taken by him was the withdrawal from the Trans-Pacific Participation. It is the trade agreement between twelve countries, including Australia and the United States (until 23rd January, 2017). The stepping out of the United States from this agreement puts immense pressure on Australian trade with China. The reason being the tariff change that is bound to happen on account of such a development. 

This report tries to analyse the post-Trump economic situation of Australia and tries to forecast the economic development that could happen in the next couple of quarters. The various macro-economic variables and indicators are used to justify and quantify the hypotheses. In addition, the report highlights the tightening of the monetary policy and an economic slowdown for the next couple of quarters. The government spending would be more focussed on the non-mining sectors. There would be decreased net exports due to the economic slowdown in China, the main importer from Australia.

Introduction

Donald J Trump is the current President of the United States of America. Before getting into politics, he was a businessman and a television personality. He is the 45th President of the USA and was elected on 10th November after defeating his rival Hillary Clinton (Pandya and Sisombat 2017). He is known for his protectionist stance in politics, which has a profound effect on the world economy, including the Australian economy. His main executive orders include repeal of the Obamacare, withdrawal from the Trans-Pacific Partnership, reopening of the Dakota Pipeline and Keystone XL and he launched the initiative of building a border wall for Mexico (Dungey and Pagan 2013). These stances have affected many of the world economic trades and GDP forecasts. In the following report, the major focus will be concentrated on understanding how the Australian economy is affected. It will also be discussed what the growth forecast for the nation is and an attempt will be made to understand the probable monetary policy of the country.

Economic Situation

After Trump has come into power, the Australian economy has changed a lot. The expected Gross Domestic Product (GDP) growth is pegged at 2.4% by the Reserve Bank of Australia. The current GDP of the country is $1230 billion (Manalo, Perera and Rees 2015). The economy rebounded in the quarter four after contracting in the previous quarter. The GDP growth increased to 2.4% from 1.9% year on year. This revival can be attributed to the strong domestic demand and an increase in fixed investments. The inflation and cash rate are currently 1.5% (Dungey and Pagan 2013). The retail sales are down on the back of weak labour market and wage growth. The consumption and investment in housing projects are expected to slow down. On the business front, growth is intact, and the investors’ confidence is robust. The exports and imports have increased by 6% and 2% respectively in the last fiscal (Downes, Hanslow and Tulip 2014). The current unemployment rate is seen at 6.1%, and the Australian stock markets have risen around 14%.

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