RBA Deputy Governor Guy Debelle warned that US-China trade war poses a “significant risk” to Australia and the rest of the world. He also defended the existing rules-based global trading system. He said, “despite some flaws, that system has delivered sizeable benefits for global growth and welfare”, and “Australia has clearly been a major beneficiary of that system.”
Nevertheless, Debelle also noted that Australia is “less vulnerable” to external shocks now. He said “if you look at the balance sheet of the country as a whole, Australia has a net foreign currency asset position”. “Hence when the exchange rate depreciates, the value of net foreign liabilities actually declines rather than increase. To reiterate, this allows the exchange rate to play the important role of shock absorber to external shocks”, he added.
