Rate cuts tipped to stem job losses from tariff carnage

Treasurer Jim Chalmers acknowledged a real risk of a global recession.

"We expect, and the Treasury expects, the implications for growth and inflation in the US and elsewhere to be very substantial," he told reporters.

"This is one of the many reasons that we describe the tariff decision to be ill-considered and unwarranted. The damage being done by that tariff decision is now very clear for all to see."

In its Pre-election Economic and Fiscal Outlook released on Monday, Treasury's economic forecasts were unchanged from the budget on March 25.

But it noted "greater-than-usual uncertainty" around the outlook, with the Australian economy set to suffer direct and indirect impacts.

"The indirect effects on Australian exports through our other major trading partners, particularly China, will be larger," it said.

Treasury still forecasts Australia's economic growth to accelerate to 2.25 per cent in 2025/26 and unemployment to remain low, around the 4.25 per cent mark.

While AMP chief economist Shane Oliver does not expect Australia to enter a recession, he predicts a slower pick-up in growth than forecast by Treasury.

"That obviously does run the risk that we could end up with higher unemployment here, back to the 4.5 per cent rate for unemployment," he told AAP.

That should prompt the Reserve Bank to cut interest rates sooner and harder.

The market now expects up to another 125 basis points of rate cuts in 2025, potentially front-loaded with a mega 50bp cut in the RBA's May meeting.

A great deal of uncertainty remains about the impact on the economy and much depends on whether US President Donald Trump flinches or doubles down on tariffs.

For Australia, another big factor will be how much stimulus China announces as it seeks to hit its five per cent annual growth rate target.

"I suspect that they'll still manipulate things to get growth close to five per cent but the risk is it comes in around four per cent - in other words one per cent lower than they're currently forecasting - which would be a dampener for Australia," Dr Oliver said.

The Australian dollar has tumbled more than five per cent in recent days as commodity prices have fallen, but Dr Oliver says the lower exchange rate will act as a shock absorber for the economy by boosting exports and profits of companies that trade in US dollars.

But Australia's relatively low debt means the government is in a better position than most to provide fiscal stimulus, said HSBC chief economist Paul Bloxham.

"They have got capacity to step up if they need to with fiscal support, but I think at this stage of the game it's watching and waiting to see what the circuit breaker is going to be in terms of providing a bit of support for that global market," he said.