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US-China trade war will kill the economy, RBA governor warns

Lowe expresses concerns for US-China trade war. Source: Getty
Lowe expresses concerns for US-China trade war. Source: Getty

The Reserve Bank of Australia’s governor, Philip Lowe, has declared the trade war between the US and China the single greatest threat to the global economy, at a business event in Sydney this week.

Lowe said trade tensions were harming global investment, wages and economic growth, Nine reported.

"(Some people in the US) say that it is time for Team West to muscle up against China and that is very worrying."

"I do not have a clear idea of what strategy the US has," Lowe said.

Lowe’s comments echo statements he made to a Parliamentary inquiry earlier this month, where he said Australia would be significantly impacted by the two nations’ dispute.

"No country has made itself wealthy and prosperous through protectionism. Building walls actually makes you worse off, we know that in the end,” Lowe said.

"If people don't want to invest, growth around the world will be lower and that will affect us here in Australia, including through wage growth and asset prices, so it's a very significant issue.”

Australia's economy is on track to expand by between two and three per cent, but this prediction could be threatened if the trade war worsens.

Scott Morrison has offered a bleak assessment of the trade tensions, saying the world needs to get used to it.

"We've just got to accommodate that, we've got to absorb it, we've got to see the opportunities in it, of which there are many," the prime minister said on Tuesday.

The ASX is set to slide again

The Australian share market is set to slide again after stocks on Wall Street retreated overnight.

The ASX futures contract was down 46 points (0.71 per cent) at 8am this morning, as statements made by US President Donald Trump at the White House on Tuesday impacted investor confidence.

"Long term, it's imperative that somebody does this because our country cannot continue to pay China $500 billion because stupid people are running it," Trump told reporters.

"My life would be a lot easier if I didn't take China on. But I like doing it because I have to do it. And we're getting great help.”

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