Weathering the financial storm – Ethinvest’s Trevor Thomas and AMP’s Shane Oliver offer insights

Trump’s trade war has many fearful of a major downturn or even recession in Australia and around the world, but Ethinvest’s Trevor Thomas and AMP’s Dr. Shane Oliver say Australia has a number of advantages that may help us weather the financial turmoil better than many countries.

In a recent article in The Fifth Estate, Trevor said that while anything that is market-linked is currently volatile, including green bonds and climate bonds that have exposure to the general financial market, climate finance for projects such as renewable energy, climate adaptation and climate mitigation initiatives are still going ahead.

“Good things will come out of this,” Thomas said. “While green investments are not, as a general category, a definitive safe harbour and there have been many companies publicly backing down from DEI (diversity, equity and inclusion) and climate commitments (in the US and elsewhere), many are still quietly getting on with green investments, decarbonisation and employment practices that support a diverse workforce,” including many in Australia.

While the market slide right now is affecting the share price of green listed companies to some degree, Thomas says in the long term, sustainable investments are “still the safest place to be.”

Companies may be less public about their commitments in the age of Trump, he said, but they realise renewables offer the lowest cost solutions and continue to decarbonise their supply chains.

And AMP’s Dr. Shane Oliver says that while Australia certainly experienced deep recessions in concert with the US in the early 1980s and 1990s, apart from the pandemic – which does not really count as it was due to health orders to stay at home – this has not been the case in recent decades. Australia avoided recession in the both the tech wreck and Global Financial Crisis and may well do so now.

Since Trump announced his tariffs instigating a global a trade war, fears of a downturn or even a recession are being felt around the world, including in Australia. This has been accentuated by the plunge in share markets, although they have yet to see closing peak to trough falls of 20% or more signalling a bear market which often can be associated with recessions. To be sure Australian growth is at risk as US and global economic activity deteriorates leading to less demand for our exports, lower commodity prices and a negative impact on confidence. The latter is already evident in a sharp fall in consumer confidence and anecdotal evidence points to weaker home buyer enquiries in the last few weeks.

However, there are several reasons why Australia should be able to avoid a recession according to Oliver. These reasons include the resilience of Australia’s economy in recent decades, that only 5% of our exports go to the US, a lower Australian dollar should provide an economic shock absorber, and the RBA has plenty of scope to cut rates if needed.

Read the full stories in The Fifth Estate and Oliver’s Insights blog.