Markets live: ASX to slip, Wall Street on edge as Donald Trump announces further tariffs

The Australian share market has fallen slightly amid renewed uncertainty over Donald Trump’s trade war, and his proposed tariffs on copper and pharmaceutical imports.

The ASX 200 was down 0.5% to 8,536 points by 10:25am AEST.

Real estate (-1.2%), industrials (-1.1%) and materials (-0.9%) are the worst performing sectors so far.

Qantas has released a statement with more details about the hack, which compromised the details of 5.7 million customers.

“There is no evidence that any personal data stolen from Qantas has been released but, with the support of specialist cyber security experts, we continue to actively monitor,” the airline wrote in its statement.

“Qantas has reconfirmed no credit card details, personal financial information or passport details were stored in this system and therefore have not been accessed.

“There continues to be no impact to Qantas Frequent Flyer accounts. Passwords, PINs and login details were not accessed or compromised. The data that was compromised is not enough to gain access to these frequent flyer accounts.”

The company also provided a more detailed breakdown of what information was accessed by cyber criminals:

• 4 million customer records: limited to name, email address and Qantas Frequent Flyer details.
• 1.7 million records: combination of some of the data fields above and one or more of the following — address, date of birth, phone number, gender, meal preferences.

I asked RBA deputy governor Andrew Hauser about the effect of the US tariffs, particularly the uncertainty generated by the seemingly ad hoc way they are being announced.

He gave a lengthy, considered and detailed answer.

Like his boss, RBA governor Michele Bullock, Hauser seems surprised by the sanguine way markets have reacted to the tariff policy, at least since recovering from the initial shock on April 2.

Coming from the Bank of England, Hauser has the Brexit experience to draw on.

He says there was a similar phenomenon there, where traders initially reacted to Brexit as the end of the world, then came to the view that the world hadn’t ended and everything was OK.

However, the punchline is that nearly a decade on from the vote to leave the EU, the UK economy is now feeling many very real long-term negative effects from being outside Europe.

Hauser implied that US tariffs and other economic and financial policies by the Trump administration may similarly have long-term negative effects that are not yet fully apparent or appreciated by financial market traders.

Qantas has confirmed 5.7 million customers were impacted in last week’s cyber attack.

Qantas Group chief executive Vanessa Hudson says the airline is focused on understanding what details of their data have been compromised and will let them know as soon as possible.

“From today, we are reaching out to customers to notify them of the specific personal data fields that were held in the compromised system and offer advice on how they can access the necessary support services,” she said.

Copper prices surged to a record high after Donald Trump expanded his trade war by announcing a 50% tariff on imports of the industrial metal.

US Comex copper futures jumped more than 12% (taking prices above $US5 per tonne).

The metal is critical to electric vehicles, military hardware, the power grid and many consumer goods:

Andrew Hauser says it’s “important that central banks do live in the real world” and he emphasises how important business liaison is to the RBA’s decision making processes.

He says he has used a lot of his time since arriving at the RBA from England to go and talk with business leaders around the country to get a better sense of trends in the economy.

In case you missed it, here’s Alan Kohler’s report from last night’s 7pm News bulletin.

Alan had a look at the market reaction to the Reserve Bank’s “shock decision” to keep interest rates on hold.

I can certainly recommend watching it!

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Economist Rory Robertson asks Andrew Hauser why are people so worried about the economy given unemployment remains historically low and inflation has fallen back to relatively normal levels as well.

Mr Hauser says “people are fed up” and he thinks that’s because the price level remains higher than it was going into COVID.

“The price level has risen so far over the past three years … people are focused on the level of prices … the answer to that is not to deflate the price level back to where it was.”

If Australia is to remain one of the world’s most prosperous countries throughout the 21st century then, RBA deputy governor Andrew Hauser says, local economists need to tackle three key questions:

“First, how will the composition and geographical location of our export markets change in response to evolving trade policies and geopolitical alliances? What implications will those shifts have for domestic output, investment, labour markets and pricing? And how do we harness our natural and human resources to take advantage of those shifts?

“Second, how will global commodity demand change over time? How long will markets for ‘traditional’ minerals including coal, gas and iron ore — mainstays of the economic model in Australia today — persist? Will markets for ‘new economy’ minerals and renewable energy sources take their place, and how can Australia best position itself to take advantage of such trends?

“And, third, how will these and other structural shifts change the sorts of shocks that stabilisation policy, including monetary policy, needs to respond to? How will that influence optimal policy design? And how might we need to adjust our thinking about trade-offs, across the different policy goals and tools available?”

Plenty of work for the economists at this conference in academia, the public service and private sector to get on with.

Australia is urgently investigating “concerning” new tariffs on pharmaceuticals announced by the United States, repeating that the nation will not be bullied into weakening its Pharmaceutical Benefits Scheme in order to escape a tariff.

US President Donald Trump imposed a fresh round of tariffs overnight, including a possible 200% tax on pharmaceutical imports and a 50% tax on copper imports.

Pharmaceuticals are one of Australia’s largest exports to the US, with about $2.2 billion in pharmaceutical products exported to the US last year.

Treasurer Jim Chalmers told ABC Radio National the new tariffs would inject more volatility into global trade.

For more, here’s the story by Jake Evans:

An interesting historical observation from Andrew Hauser, with relevance to current global economic issues:

“Australian thinkers again made important contributions to the evolving global consensus — perhaps most notably on the case against trade protection, through the work of Max Corden,” he says.

“Corden showed that the economic costs of tariffs were much larger than previously recognised, once general equilibrium effects were accounted for.

“His work, including the concept of ‘net effective rates of protection’, which captured the impact of tariffs on imported inputs as well as outputs, remains widely cited — and, sadly, is highly topical again today.”

A rather pointed observation from the RBA deputy governor.

RBA deputy governor Andrew Hauser says Australia has a rich history in economic thought.

And he argues it’s had practical benefits, leading to two “golden ages” as Australia recovered from the Great Depression and World War II, and other of free market reforms in the 1980s and 1990s.

But now the RBA board member says Australia faces a 21st-century challenge.

“The tectonic plates of the global economic system are once more in flux, as free trade is rolled back; geopolitical alliances shift; climate change accelerates; and productivity growth slows to a crawl in most developed countries,” he says.

“Simply coping with such changes will take skill. Turning them to Australia’s advantage — identifying and exploiting new trading structures and sources of growth — will require rich new thinking from Australian academia.”

And perhaps some additional bravery from the nation’s political leaders, if many of these reform ideas prove not to be widely popular outside the economics discipline.

Reserve Bank deputy governor Andrew Hauser is delivering a speech in Sydney this morning to the Economics Society of Australia.

The title of his speech is: “What has Australian macroeconomic thought achieved in the past century – and where can it contribute in the next?”

As you’ve probably gathered by now, it’s a topic for a very specific audience.

Mr Hauser made some interesting remarks about the Australian economy’s “golden ages” in his speech (which is largely an economic history lesson).

First Golden Age

In his view, the first golden age was between the 1920s and 1960s (during which the Great Depression and World War II happened).

Australia was a small commodities exporter at the time, and to achieve economic growth, “the authorities relied primarily on centralised control”.

“The exchange rate was pegged to sterling; credit volumes and interest rates were typically administratively set, and wage-setting was heavily institutionalised,” Mr Hauser said.

“Tariffs were used actively, in an attempt to protect and foster domestic industry, lift employment and reduce the economy’s reliance on volatile global commodity markets.”

Second Golden Age

Mr Hauser was referring to the economic reforms of the 1980s and 1990s in particular.

“The reforms overturned the paradigm of the first Golden Age.

“The exchange rate was floated. High tariffs were replaced with much freer trading arrangements. Constraints on the financial sector were released; and, in time, the central bank was made independent and asked to hit an inflation target.

“Of course, there was good luck too, as huge new export markets opened up in Asia. But taken together, these changes ushered in an extended period of prosperity for Australia.”

He’s up, talking about “what has Australian macroeconomic thought achieved in the past century — and what can it contribute in the next?

Hi there,

I’m joining you from the Australian Conference of Economists (ACE) in Sydney, hosted by the Economics Society of Australia.

First up this morning is a session on Australian economic history with the SMH’s veteran economics columnist Ross Gittins and the RBA’s deputy governor Andrew Hauser.

We’re obviously all hoping that Mr Hauser will say something in the Q&A session about more current economic issues.

Qantas customers say they feel vulnerable, angry and unsupported following last week’s major cybersecurity breach, and are now questioning whether the airline is doing enough to protect Australians’ personal data.

On Monday night, Qantas quietly updated its website to confirm the airline had been contacted by “a potential cybercriminal” less than a week after the data of up to 6 million of its customers was accessed in an online attack.

The airline said it was still working to verify the legitimacy of the contact and had engaged the Australian Federal Police to investigate.

But Qantas is yet to officially confirm the name of the group that has been able to access passenger names, email addresses, phone numbers, dates of birth and Frequent Flyer numbers.

The airline is also still working to determine exactly what data was stolen for each affected customer.

For more, here’s the story by Rhiana Whitson:

Who would’ve thought a decision by the Reserve Bank to keep interest rates on hold would generate so much excitement?

In fact, it became an even bigger news story (compared to if the RBA had slashed rates by 0.25 percentage points) because it was the outcome very few people had expected.

In fact, just before the rates decision was announced, markets had priced in an almost 90% chance of a rate cut.

So when I attended RBA governor Michele Bullock’s press conference yesterday afternoon, I had to get to the bottom of it.

This is what I asked Ms Bullock:

“A lot of Australians with big mortgages are probably a bit disappointed about today’s decision to keep rates on hold. So how would you explain it to them? What’s the biggest thing that prevented you and your colleagues from cutting rates today?”

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And this was Ms Bullock’s response (slightly shortened for this blog):

“I understand that households with mortgages are very keen to see interest rates decline because it helps them with their cash flows.

“I’m also really conscious that we don’t want to end up having to fight inflation again. We want to make sure we’ve nailed it.

“And as I said, the biggest thing here is that it wasn’t really directionally where we think we’re heading in terms of easing. It was more about timing and just making sure we’ve only had one quarter of underlying inflation just back in 2.9%.

“There’s a few weeks, five weeks until the next meeting. By then we will know what the June quarter CPI [consumer price index] is and if it comes in as we think it will, a little bit at the margin, we’re a little bit worried about.

“But if it comes in as we think it will continue to decline, then that validates our easing path. So that’s what we’re waiting for.

“And that’s the reason, as I said earlier, it wasn’t so much the difference in opinion amongst the board wasn’t so much directionally. It was about timing.”

Simply put, Ms Bullock strongly hinted the RBA would cut interest rates at its next meeting in August.

The governor said she’s waiting for the June quarter CPI figures (which the ABS will publish at the end of this month), and is expecting to see inflation fall even further.

So the RBA board (by a 6-3) majority wanted to keep rates on hold for a little longer, just to play it safe (though it hasn’t been a popular move).

The Reserve Bank disappointed mortgage borrowers and shocked market economists by keeping interest rates on hold in July.

But it’s worth remembering that just a couple of weeks ago, the general expectation was that we’d need to wait until August for the next rate cut.

That all changed when the ABS released its monthly Consumer Price Index (CPI) Indicator from May on June 25, which showed headline inflation at 2.1 per cent over the past year and the RBA’s preferred, more stable trimmed mean measure at 2.4 per cent.

That’s below the mid-point of the RBA’s 2-3 per cent target band, hence why most of us who try to follow the central bank’s thinking thought it would cut sooner rather than later.

The only problem? The Reserve Bank doesn’t trust the monthly ABS numbers.

For more, here’s the latest analysis from the ABC’s business editor Michael Janda:

Here’s more information on those new tariffs Donald Trump announced overnight.

Mr Trump has flagged a possible 200% tariff on pharmaceuticals — one of Australia’s biggest exports to the US — but says manufacturers will be given time to move to America to dodge the tax.

The US president also said copper was likely to be hit with a 50% tariff.

To date, pharmaceuticals and copper have both been exempt from the US’s ever-evolving tariffs regime, pending two separate investigations by the Department of Commerce.

But Mr Trump has long railed against American dependence on foreign producers of the products, given the lifesaving nature of many imported medicines and copper’s importance to the industrial sector and technological innovation.

Here’s the full story by Brad Ryan: