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US—impact of government shutdown on Australian exports minimal

The US government shutdown has been resolved after a record 35-day standoff. Funding for a US$5.7b wall on the Mexican border was the main point of contention. But a resolution was reached in late January as President Trump signed into law a funding package that allowed the government to return to normal. Current estimates suggest the shutdown is likely to shave 0.3 ppts off first-quarter growth. This is a result of a) forced cuts to government spending, and b) reduced consumption from the 800,000 workers who were either forced to take leave without pay or who worked without pay, during the shutdown. The drag on consumer and business confidence is also likely to have weighed on growth. However, the resolution has abated concerns that a prolonged shutdown would cause significant longer-term harm to the US economy.

The impact on Australian exports is likely to be muted. For instance, Australia’s export receipts from the US held up relatively well during the last two government shutdowns (2013 and 2018). While causality can’t be assured, manufacturing, which accounts for over 50% of goods exports, only suffered minor declines during the last two shutdowns. Food, beverages and tobacco were not far behind, declining around 2% on average (Table).

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