A private index showing Australia's six-month annualized growth rate slowed down in March as the effects of the US tariffs start to weigh on the economy.
The Westpac-Melbourne Institute Leading Index eased to 0.6% from 0.9% in February, according to the bank's press release on Wednesday.
The tariff wars escalated as both US and China slapped each other with retaliatory tariffs, causing global markets plunging after the April 2 tariff announcement. Currently, President Donald Trump is considering adding tariffs against China to 245%.
The effect of the tariffs on Australia is expected to be relatively small and manageable, but Westpac expects a slower growth recovery. The lender downgraded its 2025 outlook to a 1.9% growth from 2.2% increase as a result, Westpac Economics' head of Australian macro-forecasting, Matt Hassan said.
The external factors have weaker sentiment, with the central bank expected to further trim key rates by 25 basis points.
"Indeed, given the scale of the tariff shock unfolding abroad the Board is likely to signal a clearer shift in focus away from lingering questions about inflation to downside risks to growth," Hassan said, "That in turn will set the scene for further policy easing in the second half of the year."
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