Wild way Trump win could make Aussies poorer

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Donald Trump And J.D. Vance Hold First Joint Campaign Rally After The RNC

Former US President Trump’s economic policies could affect Aussie households. Picture: Getty

A Donald Trump second term and the resulting trade war escalation with China could drag Australia into a recession that would send home values plummeting.

Australian households have, until now, done remarkably well in weathering successive interest rate rises and cost of living pressures, with economists pointing to low unemployment as the reason.

This could all change if a Trump presidency kicked off a new, fiercer trade war between the US and China, causing economic conditions in the latter – Australia’s main trade partner – to deteriorate.

A US-China trade war creating a recession in Australia was a real risk, experts told News Corp.

Vice President Kamala Harris Delivers A Keynote At The American Federation of Teachers' 88th National Convention In Houston

Kamala Harris is the presumptive nominee for the Democrats, who have also proposed tighter trade rules with China.

China has already been grappling with slowing growth, falling consumer spending and one of the world’s worst housing bubbles.

Any further shocks in the world’s second largest economy – by far the biggest market for most of Australia’s raw materials – could deal a heavy blow to the Commonwealth economy.

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A headline Trump economic policy is a plan to impose tariffs on imports from all countries, with a proposed 60 per cent tariff placed on goods from China.

Trump has also signalled a 10 per cent tariff on Australian exports, claiming it would protect US businesses from nations trying to “steal our jobs” and “steal our wealth”.

Australia Institute chief economist Greg Jericho told News Corp the tariffs could stymie Chinese demand for Aussie products and we’d be unlikely to find other markets able to make up for the lost demand.

“It would certainly affect us quite quickly,” he said.

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A recent Organisation for Economic Co-operation and Development (OECD) report indicated Australia, along with South Korea, was particularly vulnerable to economic shocks from China.

Australia would endure the second-largest national income fall in the world if trade tensions with China worsened, the OECD report noted.

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PropTrack economist Anne Flaherty said Australia’s strong economy over recent years, coupled with a housing supply shortage at a time of soaring population growth, had insulated it from a market correction.

Housing affordability issues have already pushed many out of the formal housing market. Picture: Thomas Lisson.

She said the country would likely have experienced property price falls if it were not for these conditions, given that housing affordability was stretched.

Ms Flaherty noted that periods of sharp interest rates rises and declining housing affordability have usually been marked historically by property price corrections.

My Housing Market economist Andrew Wilson said a recession, coupled with higher interest rates, would raise the risk of a large-scale property downturn.

“There are a lot of households struggling to pay off their loans, but so long as they keep their jobs they have options,” he said, noting that many households had cut their expenditure to deal with cost of living pressures.

“What’s typically happening is that people are selling the holiday home, the extra car, moving their kids out of private school, all these things that can help them keep the family home.

“Once there is a loss of employment, things become different and that’s when a lot more people could be forced to sell their homes.”

US quantitative easing would cause a headache for Australian monetary policy makers.

Mr Wilson said a mass of mortgagee sales on the market, coupled with falling buyer sentiment, would see home prices fall.

Ray White chief economist Nerida Conisbee said a Trump presidency on the whole would be more challenging for the Australian economy to navigate than the Democrats retaining power.

“Both Trump and Harris are negative on China, but it’s more complicated than just trade policies,” she said.

“Some of Trump’s other policies could hurt Australia. Trump has repeatedly shown he’s protectionist. He wants the US dollar to be weaker.

“It’s not yet clear how he’d achieve that, but one way would be printing more money, or quantitative easing, which would be inflationary. He also wants to cut taxes. These together could create an unstable environment for Australia.”

Ms Conisbee said the country was already “skirting” a recession and this posed dangers for the property market.

Recent buyer demand at auctions has been supported by low unemployment, but this would change if Australia went into recession. Picture: Sam Ruttyn

“A recession in itself would lead to rising unemployment, which would be the biggest problem for the (property) market,” she said.

“A recession would mean more properties coming to market, but fewer buyers, leading to a drop in prices.”