The broad-based nature of the proposed US tariffs, retaliation from major partners, and other policy shifts have the potential to structurally alter the world economy, potentially lifting the cost of production globally, contributing to slower economic growth in Australia, the Reserve Bank of Australia's (RBA) Assistan Governor Sarah Hunter said in a speech on Tuesday.

Higher US tariffs on Australian exports are unlikely to have a material direct impact, as Australian exports to the US only account for around 1.5% of Australian GDP. Australia's resource export volumes are less sensitive to movements in global demand than other exports, as it is a relatively low-cost producer of bulk commodities like iron ore.

The unpredictability of where tariffs will settle and changes to other policy settings have the potential to create significant uncertainty, both around the nature of the policies themselves as well as their impact, Hunter said.

Higher global uncertainty has a large negative effect on Australian business investment, while the negative effect on consumption is more modest, earlier research found.

Overall, weaker global growth would put near-term downward pressure on the prices of globally traded goods. For countries that are not imposing higher tariffs, such as Australia, this could flow into import prices, making products cheaper and lowering inflation.

The central bank developed a framework that captures the key transmission channels and combined it with a set of alternative scenarios for key assumptions and judgements. In its base case scenario, it expects weaker demand to outweigh the inflationary impact of any supply chain disruptions, she added.

The relative move of capital towards Australian assets compared to the United States reflects an increase in capital inflows, and the RBA will monitor how these channels play out over time.