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(Bloomberg) — Goldman Sachs Group Inc. lowered its forecast for Australia’s economic growth in 2025, pointing to likely “negative spillovers” from the incoming Trump administration’s expected increase in tariffs on China.
Goldman now sees gross domestic product rising 1.8% next year, compared with 2% seen previously, reflecting the anticipated impact on exports from Australia’s biggest trading partner, according to its Australia and New Zealand 2025 Outlook, released Monday. President-elect Donald Trump has threatened to implement 60% tariffs on exports from China as he seeks to protect US firms and jobs.
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Australia’s growth has slowed to a crawl this year as elevated interest rates — currently at a 13-year high of 4.35% — have hurt consumer spending. Goldman is maintaining its “dovish” position that the Reserve Bank of Australia will start easing in February, earlier than many other economists and markets predict.
Goldman expects the central bank will cut at the first meeting next year and reach a terminal rate of 3.25% by November. Money markets don’t see the RBA easing until May.
“Our forecast is more dovish than market pricing and consensus expectations. On balance, we view higher US tariffs on China as having a dovish read-through for Australian rates,” economists led by Andrew Boak said in the report.
Australia is due to hold an election by May 2025 and new voter-friendly policies may further stimulate the economy, they said. The center-left Labor government has already announced a slew of measures to ease voter disquiet over rising living costs, including energy rebates, expanded rental assistance and reducing university student debt.
“We are mindful of upside risks from new fiscal stimulus ahead of next year’s federal election,” Goldman said.
In New Zealand, Goldman’s base case is for the central bank to continue to cut in 50 basis-point increments in November and February. It will then slow the pace to quarter-point reductions per meeting and reach a terminal rate of 3% in July 2025.
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