Reserve Bank governor Michele Bullock has warned that the next five years may see a gradual global economic decline, driven by the unintended consequences of Donald Trump’s protectionist policies. These policies, aimed at bolstering American industry, could lead to higher costs and slower growth globally.
In an exclusive interview, Bullock compared the fallout from Trump’s tariff campaign to the long-term challenges faced by the UK after Brexit. As the first RBA governor to hold regular press conferences, she emphasized her commitment to making complex economic issues understandable—explaining them as if speaking to her mother.
The Reserve Bank is releasing a report this week detailing its response to the 51 recommendations from an independent review—prompting its most significant changes since adopting the 2–3% inflation target in the early 1990s. Reforms include the creation of a separate interest rate-setting committee, less frequent two-day meetings, and routine press conferences to explain monetary decisions.
This overhaul has come amid the biggest inflation surge since the 1980s, alongside global disruptions including the wars in Ukraine and Gaza and economic shifts spurred by U.S. trade policies.
Bullock said while the Reserve’s daily focus remains on China and the Asia-Pacific region, economic developments in the U.S. signal tougher times ahead. Her deputy, former Bank of England official Andrew Hauser, often draws parallels with Brexit, describing it not as an immediate catastrophe but as a “long-term disaster.”
“Nothing’s falling off a cliff,” Bullock said. “But in five years, we’ll look back and see this as the beginning of the decline.”
She traced the issue to national efforts to retreat from global supply chains, leading to slower trade growth, rising geopolitical tensions, and reduced productivity. “The U.S. wants to produce everything domestically—even if it’s less efficient—which brings unintended consequences,” she said. “It’s going to dampen global momentum and make things more sluggish.”
The Reserve Bank recently held interest rates steady at 3.6% after three cuts in 2025. Markets expect a rise to 3.85% by August. Bullock noted that during past easing cycles, banks hadn’t fully passed on rate cuts—but this time, the entire 75 basis point reduction reached borrowers, easing financial conditions.
However, consumer spending remains inconsistent—a surprise to the RBA. While Australians splurge on major events like concerts by AC/DC and Lady Gaga, many are also saving through offset and redraw accounts. “People might go big on one thing, but then cut back elsewhere,” she said.
Some critics argue government spending is hindering the RBA’s inflation control efforts, with a projected federal deficit of $40 billion to be confirmed in the mid-year fiscal update. But Bullock maintained the Reserve’s focus must remain on its mandate.
“I’m not going to tell governments how to manage fiscal policy,” she said. “And I don’t want them telling me how to manage monetary policy.”
A hallmark of Bullock’s tenure has been regular press conferences. Unlike her predecessor Philip Lowe—who held them only during pandemic-era quantitative easing—Bullock sees them as a vital communication tool. Despite discomfort with media scrutiny, she believes they’ve found a “nice rhythm,” and remains firm in her aim to reach everyday Australians.
“I try to explain things so my mum would understand,” she said. “She and Dad actually watch them—they don’t just listen.”
Rick Maggi. Financial Advisor Perth, Westmount Financial