The Australian central bank’s No. 2 official warned that the current threats to the global rules-based trading system were a major risk to both his country’s economy and the world’s.

Australia has been a key beneficiary of global trade, as its current account approaches its first surplus since the 1970s, Deputy Governor Guy Debelle said Tuesday in Canberra. The local currency has been able to repeatedly help the economy absorb external shocks, thanks to the large share of the country’s foreign liabilities denominated in Aussie dollars, he said.

“These developments have taken place under the rules-based global trading system that has been in place for a number of decades now,” Debelle said in a speech. “The current threats to the system are a significant risk to both Australia and the world.”

Policy makers are on edge as a damaging tit-for-tat trade war between the U.S. and China threatens to spill over into a serious global economic downturn. The Reserve Bank undertook back-to-back rate cuts in June and July and is expected to ease further as the darkening global outlook overshadows domestic pressures.

In a question-and-answer session following the address, Debelle was asked where the likely lower bound was for the cash rate, which is currently at a record-low 1%. He replied that, as the governor has said previously, the best guide is where the U.K., Canada and the U.S. got down to.

“It was somewhere around about zero, quarter, half a percent. And so I think that probably gives us some sort of guide as to what the equivalent might be here,” he said.

Asked later whether if the RBA reached 0.5%, policy makers would embark on unorthodox measures or simply stay there, Debelle signaled the former.

“If you look at where the others landed, it was somewhere quarter to half,” he said. “If we are not achieving our objectives, then we have a mandate to try and achieve our objectives, which probably requires doing something rather than doing nothing for a long period of time.”

Helping Out

Debelle’s speech reflected on the extraordinary narrowing of Australia’s current-account gap in recent years. Once seen as a key vulnerability -- demonstrated by the crises of other countries when their currency depreciated and foreign debt payments soared -- it’s now seen as a simple reality in a country with a small savings pool and lots of investment opportunities.

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