Trump’s tariff plan to fuel global inflation, could keep rates high: CBA boss

The chief executive of Australia’s largest bank says Donald Trump’s proposed tariffs on all imports into the United States will fuel global inflation and lead to higher interest rates for longer.

Commonwealth Bank boss Matt Comyn said Trump’s victory in last week’s presidential election had already sent the sharemarket soaring and the bonds market falling, but it was too early to tell whether those volatile movements were short or long-term gyrations.

CBA chief Matt Comyn unveiled a $2.5 billion profit in the September quarter. Credit: Peter Rae

“I think it’s reasonable to expect that in the US, given the policy agenda – and assuming it’s implemented substantially or in full – will be inflationary and may see rates higher for longer,” Comyn said after he handed down CBA’s first quarter trading update and unveiled a $2.5 billion profit for the first three months of the financial year.

“We would wait to see a little more clarity on exactly what policies will be implemented when, but everyone is mindful of what the impacts will be globally, what the outlook is for the US and how that might flow through into Australia.”

Trump has proposed imposing tariffs of between 10 and 20 per cent on all imports into the US, while he has threatened to slap a 60 per cent tariff on imports from China. Economists agree the tariffs will drive up prices in the US and fuel inflation, which has been steadily falling.

CBA said although domestic inflation had been moderating, it remained sticky, and global geopolitical tensions – including the results of the US election – were creating uncertainty.

Comyn expects the economy to improve in 2025 when inflation hits the Reserve Bank of Australia’s target rate of between 2 and 3 per cent and household incomes begin growing again.

CBA economists are forecasting an RBA rate cut in February, but Comyn said the trajectory remained “finely balanced” as services inflation was stickier than anticipated and unemployment remained relatively low at 4.1 per cent.

He said some households remained under financial pressure, but the number of mortgage holders behind in their repayments eased in the September quarter. Impaired assets at the bank grew to $8.8 billion, but mortgage delinquencies remained stable at 0.65 per cent.

“This time of year, you see a slight improvement in arrears … it’s just a timing of cash flows and tax refunds, we’ve seen the stage 3 tax cuts come through, the majority of that has been saved versus spent,” Comyn said.

“There’s also been some targeted relief for households at the federal but also state level. I think that slightly eased the burden in a targeted way on households.”

While CBA’s unaudited cash profit of $2.5 billion in the three months to September 30 was flat compared to the same time last year, it was 5 per cent higher than quarterly earnings in the second half of the 2024 financial year.

“Many Australians continue to be challenged by cost of living pressures,” Comyn said. “Inflation is moderating, but at a slowing pace, and global geopolitical tensions are creating uncertainty.

“Growth in the Australian economy remains slow, as higher rates continue to weigh on consumer demand and bring inflation back to the target range.”

Expenses rose 3 per cent on the back of increased wages, spending on investments, and an extra day in the quarter.

Home loans grew $8.6 billion in the September quarter despite a “highly competitive market”, while household deposits grew $15 billion over that same period.

UBS analyst John Storey said: “The CBA … trading update showed a number of positive trends most notably around improving revenue outlook.”

CBA shares closed 0.4 per cent lower at $149.62.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.