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Speaker 1: Another war underway. Of course, are going to keep that

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Speaker 1: in mind, the questions around the uncertainty of the global

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Speaker 1: economic or the global economy, increase shipping through the Middle East,

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Speaker 1: the price of oil as spiked. This is against the

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Speaker 1: backdrop of already reduced growth forecast due to things like tariffs.

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Speaker 1: Now Westpact groups A chief economist, Lucy Ellis happens to

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Speaker 1: be in the country with us this morning. Lucy, very

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Speaker 1: good morning to you.

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Speaker 2: Good morning, Mike. Great to be here.

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Speaker 1: Do you materially change your view of the world now

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Speaker 1: that Iran and Israel are going at it?

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Speaker 2: It's not clear that it's a material change to where

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Speaker 2: we already were, which is an increasing number of regional conflicts.

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Speaker 2: They're not necessarily spilling out into global conflict. But we've

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Speaker 2: seen Israel and Iran go at each other a couple

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Speaker 2: of times. We've got your Russia having invaded Ukraine and

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Speaker 2: that's been going on for quite some time. We've also

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Speaker 2: seen Iran and Pakistan how to go at each other recently.

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Speaker 2: So I think where we're going to be seeing more

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Speaker 2: of these regional conflicts, and that's very worrisome. But I

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Speaker 2: think they do have a character of staying regional rather

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Speaker 2: than going global. At the moment, there are a lot

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Speaker 2: of countries saying we want you to de escalate, we

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Speaker 2: want you to de escalate. You're looking at the headlines

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Speaker 2: this morning, it's quite clear Israel has no intention of

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Speaker 2: just de escalating. It has a particular objective, which is

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Speaker 2: to remove Iran's nuclear capability, and it looks like it's

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Speaker 2: going to keep going until that's done.

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Speaker 1: Economically, then do you worry more about the tariffs and

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Speaker 1: what may or may not happen there.

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Speaker 2: We've always said at Westpact that what the US had

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Speaker 2: initially announced was an act of economic self harm. It

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Speaker 2: was far too self destructive to stand at the levels

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Speaker 2: that were originally announced, and so they were always going

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Speaker 2: to de escalate. And so you saw the US negotiating

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Speaker 2: with itself offering a cut and a carve out to

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Speaker 2: electronics when they realized how much an iPhone was going

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Speaker 2: to cost in the US if they went through with this.

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Speaker 2: We've seen this framework deal last week with China where

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Speaker 2: it does look like, well, there will still be significant

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Speaker 2: tariffs on China in the US, but it's a lot

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Speaker 2: lower than what was announced initially. China has de escalated

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Speaker 2: its retaliation. I think the way to think about the

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Speaker 2: tariffs is this is still going to be something that

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Speaker 2: imposes harm on the US economy. We will still see

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Speaker 2: trade patterns change to some extent, but other countries aren't

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Speaker 2: going to escalate. Other countries are not imposing tariffs back

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Speaker 2: on the US.

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Speaker 1: How much work has Elbow got this week as he

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Speaker 1: heads to Canada to have a word with Trump, given

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Speaker 1: your situation as a surplus from the American side of

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Speaker 1: the equation, hence Donald Trump's sentiment that he's being ripped

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Speaker 1: off and you've got your steel issues. Is their business

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Speaker 1: to be done there or we just wouldn't have a

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Speaker 1: clue how Trump runs things.

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Speaker 2: At some level, you almost don't want to draw attention

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Speaker 2: to yourselves. Australia, like New Zealand, has a ten percent tariff,

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Speaker 2: so you know, you guys, US and the penguins are

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Speaker 2: all being tariff at the same level. A ten percent

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Speaker 2: tariff isn't really going to change minds about how much

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Speaker 2: to import from Australia and New Zealand, So you know

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Speaker 2: this is not going to be particularly damaging to our

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Speaker 2: economies as a whole. The steel is a problem, but

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Speaker 2: that has already been the subject of considerable government support.

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Speaker 2: It's unlikely that we're going to be able to get

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Speaker 2: a carve out from the US just for steel and aluminium,

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Speaker 2: and in many respects these are things we can export

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Speaker 2: to other places. You know. The commodities that we do

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Speaker 2: tend to export to the US, things like beef, as

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Speaker 2: does New Zealand, which they're going to keep importing because

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Speaker 2: we have grain fed beef that makes back better hamburger patties,

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Speaker 2: or we can direct it to up elsewhere. We're certainly

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Speaker 2: selling more beef to China since all this happened. And

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Speaker 2: of course there's also services. People may not be aware,

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Speaker 2: but Australia had a seven and a half billion dollar

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Speaker 2: export industry called software licensing. Thinks Canvorin, Lassian and wivetech

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Speaker 2: all add up to almost as much of an export

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Speaker 2: industry as our wheat exports last year. It's more than bali,

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Speaker 2: it's more than our aluminium industry. So those things aren't tariffed.

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Speaker 2: And so I think we need to just focus on

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Speaker 2: the less damaging parts of our relationship, because drawing attention

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Speaker 2: to ourselves isn't going to help us wise.

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Speaker 1: Woods Lucie appreciate your time very much, Lucy Elvis, who's

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Speaker 1: the Westpac Group chief Economists. For more from the Mic

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Speaker 1: Asking Breakfast, listen live to news talks that'd be from

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