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What does a Trump administration mean for Australian investors?

27-Nov-2016

 

While no one really knows what’s ahead, Australian economists have cautioned against overstating the impact of a Trump administration. Now he’s won the election, he seems to have more of a pragmatic approach, backing away from some of his promises and listening to advisers. What we do know is that Trump plans to boost America’s economy by:

  • Raising tariffs which will make it harder for Chinese, Mexican and Canadian exporters to tap into the US market.

  • Major infrastructure developments to create employment, boost the economy and ‘re-fire’ the American steel furnaces.

  • Lowering US tax rates to encourage consumer spending and encourage repatriation of the large amounts of money that US corporations hold overseas.

  • Reducing their global police presence, that will force other countries (like Australia) to increase defence spending.

 

What does this mean for the Australian economy?

 

If his policies are successful, America’s economy will once again be very strong. This will manifest in higher global interest rates, increased inflation, and will likely put pressure on the Chinese economy (a major exporter to the US). It’s likely the USA will enjoy higher levels of investment, lowering the Aussie dollar. This would have a positive effect on our exporters, however Chinese demand on our resources will be lower.


Following Trump’s victory, there was an increase in US Google searches on ‘Moving to Australia and moving to New Zealand’. And here, www.realestate.com.au noticed a spike in searches for Australian property from Clinton strongholds in the USA. 


The US is the second biggest foreign investor in Australian property. Foreign investors see Australian property as secure because we have a stable banking system and democracy. If there are more obstacles for foreign investors into the US, commercial real estate in Australia may become an attractive alternative for large investors. However, this prospect needs to be considered in conjunction with the potential for rising interest rates in the medium term which might mean commercial yields fall.

In summary, while President Elect Trump creates uncertainties for the global economy, trade and share markets, the risks to the Australian economy should not be catastrophised. Here at Investment Zone we see no reason to panic if you already have your investment portfolios with us.

 

 

 

 

 

 

 

 

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