NAB boss worried ‘tariff madness’ could put future rate cuts at risk

Bosses of two of the country’s largest banks have warned that an escalation of President Donald Trump’s trade war would harm global economic growth and drive up inflation, with one saying future interest rate cuts could be at risk.

National Australia Bank chief executive Andrew Irvine told the Australian Financial Review’s banking summit on Tuesday that although the tariffs announced so far by the US weren’t a major problem for Australia, his bigger concern was what an escalation of the trade war could mean for inflation.

NAB chief executive Andrew Irvine warned of the inflationary impact of “tariff madness”.Credit: Dominic Lorrimer

Meanwhile, Commonwealth Bank boss Matt Comyn predicted more volatility in the financial markets due to the high levels of uncertainty over the Trump administration’s plans, and added that global economic growth was likely to suffer as a result of tariffs and other trade barriers.

Irvine, who runs the country’s biggest business lender, said key issues for Australia in any trade war would be the impact on our crucial trading partner, China, and the effect on inflation over the medium term.

“The thing I worry about is less about what’s going to happen in the next few months, and it’s beyond ’25,” Irvine said at the summit in Sydney.

“If we do have a global tariff war, and all the drama and tit-for-tat stuff does turn into bilateral trade really reducing, and 25 per cent tariffs [are put] on a vast majority of goods and services – that’s highly inflationary.

“And if global inflation ticks up, what that means is that interest rates will not reduce to the level they otherwise would, and I think that could be problematic for Australia,” he added.

Irvine said NAB’s view was that the Reserve Bank would still make two more cuts of 0.25 percentage points in the second half of 2025, before adding: “But if this tariff madness does happen, we could be at the end of the reduction cycle, and so we’ll have to wait and see.”

Comyn also said Australia was better placed than other countries, but there was a risk of slower global growth and higher inflation in the medium term.

“I think there’s certainly risks to the downside around slowing global growth, inefficiencies in trade, therefore more inflationary … I do think Australia is relatively well-placed, but I think we need to be certainly very mindful about that over the medium and longer term.”

Commonwealth Bank CEO Matt Comyn.Credit: Oscar Colman

Comyn said Australia was more “insulated” than other countries, and CBA did not expect to change its lending settings in response to recent global events. In the shorter term, Comyn said financial markets will be volatile.

“Markets do not like the uncertainty that is sort of prevalent at the moment, so I think we’ll see some pretty wild swings,” he said.

Earlier, Irvine and other bankers at the event welcomed the Reserve Bank’s February rate cut, saying it had boosted confidence significantly.

CBA retail banking chief Angus Sullivan and ING Australia CEO Melanie Evans said there had been a notable increase in interest from mortgage borrowers following the RBA’s rate cut, while Irvine said the rate cut had an “outsized” effect on sentiment and confidence.

“It’s my strong view that the trough of this economic cycle was the back half of last year, and that 2025 is going to be better than 2024,” he said.

Also at the event, Australian Prudential Regulation Authority chair (APRA) John Lonsdale emphasised the uncertain environment facing banks, pointing to the prospect of a global trade war, conflict in the Middle East, and the Trump administration’s pledge to roll back financial regulation.

Lonsdale said the number one topic arising in his recent discussions with bank bosses was international upheaval regarding regulation, but he reiterated that APRA strongly supported the regulations imposed on banks to make finance more shock-proof since the 2008 global financial crisis.

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