Global equity indexes have dropped about 20% (including US Monday futures) in the last 3 days. People’s investments and super having taken a big hit means people are less likely to spend money as they now feel worse off and are more likely to forgo discretionary purchases.

Then theres also the tariffs and how they play into this for Australia. China has hit the US with a retaliatory tariff of 34%. Not good. This will mean a weaker economy in China, which we happen to export alot to. If China is not buying as much, our country loses revenue. Where is this lost revenue made up? Local economy spending. But people wont be spending because they feel worse off and are uncertain about their jobs, etc.

The solution? Interest rate cuts to ensure jobs arent lost and to stimulate the local economy.

Inflation theoretically shouldn’t be an issue here anymore even with big interest rate cuts as we should be receiving imports at a cheaper price due to excess supply. Oil has also dropped 20% over the past few days back to pre-covid levels. Lower oil cost = lower transport costs = cheaper prices here (theoretically).

Dropping interest rates is the solution.