Reserve Bank of Australia governor Philip Lowe has warned the trade war between China and the US is the biggest single threat to the global economy.

Speaking at a private business event in Sydney this week, Lowe said the ongoing battle between the two nations was hurting global investment, wages and economic growth.

"I do not have a clear idea of what strategy the US has. (Some in the US) say that it is time for Team West to muscle up against China and that is very worrying," he said, according to The Sydney Morning Herald and The Age.

He noted China's approach to intellectual property rights, the role of state funding and the purchasing of overseas assets as being among the biggest US concerns about China.


His words of warning came after Scott Morrison said Australia and the rest of the world must get used to the trade war between the US and China.

The Prime Minister offered a bleak assessment of progress in resolving the rift, as the two superpowers continue to trade blows in their long-running tariff spat.

"I think we're going to have to get used to this for a while, this level of tension," Morrison told the Seven Network yesterday.

"We've just got to accommodate that, we've got to absorb it, we've got to see the opportunities in it, of which there are many."

The PM was initially confident the US-China trade war would be resolved last year.

His hopes were raised again after the G20 Summit at Osaka in June. "But we've seen what's happened since then," he said.

As he prepares to visit the G7 Summit in France this weekend, the Prime Minister is treading a fine line in the protracted trade war.

China is Australia's largest trading partner and the US its most significant security ally.


Morrison said given China's economic success over the past few decades, it was time Beijing adhered to the same rules other countries faced. "Having achieved that critical mass of economic performance, the rules that apply to all of us, the United States, have got to apply to China as well," he said. "And the rules-based order where it comes to how technology is handled, how partnerships are formed, how payments are made.

"How you reduce emissions, for example, I mean we should all be subject to the same rules now."

Shadow treasurer Jim Chalmers said Morrison should stop pretending weaknesses in the Australian economy had suddenly emerged as a consequence of tensions between the US and China.

"He says rightly that the management of our relationship with China and with other countries … is a very important thing for him to focus on," Chalmers told reporters in Brisbane.

"(But) there are substantial weaknesses in our own economy. His denial of our own economic weaknesses closer to home, his failure to come up with a plan, leaves us dangerously exposed to global shocks."

He said Morrison had an opportunity at the G7 meeting to work with other countries to encourage the US and China to resolve their differences.

Meanwhile, tensions between the two countries look set to continue, with US President Donald Trump recently stating "somebody had to take on China".

He says his administration is looking to cut US taxes but he isn't talking about doing anything at this moment.

Trump added he was always looking at a payroll tax cut, and a lot of people would like to see it.

The Washington Post has reported the administration is considering a temporary payroll tax cut to boost the US economy, which has recently shown signs of slowing down in the near future.

"We're very far from a recession," Trump told reporters yesterday during a White House visit by Romanian President Klaus Iohannis.

He added the US was doing well on the economy, but "the fact is somebody had to take China on".

He said China still wanted to make a deal. "We really need a Fed rate cut," Trump said, arguing there cannot be a large "disparity" between rates in the US and elsewhere in the developed world. "We have to at least keep up to an extent," he said.

The President has long been urging the US central bank needs to cut rates to help bolster the economy. Many of the recent economic woes, however, stem from concerns over a US trade war with China and other powers.

Trump has been talking up the economy in recent days and dismissing recession fears. A strong economy is seen as key to his re-election prospects in 2020, but trade tensions with China are stoking concerns about an imminent slowdown.

Millions of US workers pay payroll taxes on their earnings to finance the Medicare health insurance program for the elderly and social security, which provides income payments for retirees.