With just over a month until the US elections are held, we have been having many conversations with clients around how this may impact our economy, their portfolios and whether or not the outcome may lead us down different pathways here in Australia.
The outcome of U.S. elections can have a big impact on the Australian economy because of the strong ties between global trade, investment, and financial markets. Here are the main ways U.S. policies can influence Australia:
- Trade Policies
The U.S. is a key trading partner for Australia, especially in sectors like agriculture, resources, and services. If U.S. trade policies change—such as introducing new tariffs or renegotiating trade agreements—it could affect Australia’s ability to sell goods to the U.S. or other countries.
- Global Economic Stability
The U.S. is central to global economic stability. Changes in U.S. policies, like adjusting interest rates or altering fiscal strategies, can create uncertainty in global markets, which in turn can affect Australia’s economic performance.
- Commodity Prices
Australia is a major exporter of commodities like iron ore, coal, and natural gas. U.S. policies that influence global economic growth—especially in China, Australia’s largest trading partner—can impact the demand for these exports. For example, if the U.S. focuses on reducing fossil fuel use, it could lower global demand for coal and gas, affecting Australian industries.
- Currency Movements
The U.S. dollar’s value has a direct effect on the Australian dollar (AUD). U.S. election outcomes that lead to changes in monetary policy, like interest rate hikes, can either strengthen or weaken the U.S. dollar. This shift affects the AUD, influencing the cost of Australian exports and imports.
- Investment Flows
U.S. elections can change investor confidence. If election results create uncertainty, global investors may seek safer options like U.S. Treasury bonds, which could lead to less investment in Australia. On the other hand, if the election leads to stable and pro-business policies, Australia may attract more foreign investment.
- Climate and Energy Policy
Australia’s energy sector, particularly coal and gas, could be impacted by U.S. climate and energy policies. If the U.S. pushes for renewable energy, it may reduce global demand for fossil fuels, affecting Australia’s exports. However, if the U.S. continues to support traditional energy, Australia’s fossil fuel sectors could benefit.
- Defence and Security
Australia’s defence strategy is closely tied to its alliance with the U.S. Changes in U.S. military policy could influence Australia’s own defence spending and regional security strategies.
In short, U.S. election outcomes can affect Australia through trade, investment, currency movements, and global economic stability. Given the strong connections between the two countries, any major policy shifts in the U.S. are likely to impact Australia’s economy, both directly and indirectly