"I'm a little bit more worried about the animal spirits, both in Australia and elsewhere, and the confidence impacts. It could be worse than we might hope."

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Australia has avoided recession for more than 27 years and dodged the 2009 global downturn by deploying fiscal policy at home and then riding a wave of demand for its commodities as China injected massive fiscal stimulus. Today, Australia is potentially the meat in a trade-war sandwich as the most China-dependent economy in the developed world and one of the US's staunchest allies for the past 70 years.

"There has always been this sense that the risks around what's happened with trade wars, and the way that was going to play out in Asia, was always to the downside," Auld said. "Trade wars are largely unprecedented in the last couple of decades, at least on this scale."

Ridout said that, during a recent trip to the US, she found the overwhelming consensus was that a recession there is almost inevitable. The combination of an economy already at full employment receiving a huge dose of stimulus from the Trump administration's tax cuts suggests inflation is likely to accelerate, prompting the Federal Reserve to keep raising rates.