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2 Apr 2015
China’s rising impact on Australian economic growth – NAB
FXStreet (Barcelona) - Gerard Burg, Senior Economist – Asia, at National Australia Bank, highlights the increasing impact on China on Australia’s growth, and further adds that with the Chinese growth model evolving, the longer-term outlook for Australian exports look dicey.
Key Quotes
“The University of Sydney’s analysis in the ACBC report utilises the World Input-Output Database (WIOD), which provides a stronger quantitative basis to determine the contribution. Between 1995 and 2011 (the current range of the database), the contribution of direct trade with China rose continuously, contributing in excess of 5.5% of Australian GDP in 2011.”
“The ACBC report shows that Australia’s two-way trade (imports and exports) with China rose by 17% in 2013, to almost $17000 per household – making China by far Australia’s largest trading partner. In comparison, two-way trade per household with Japan was almost $8000 and the United States totalled just over $6000 in 2013.”
“The majority of Australia’s two-way trade with China has been exports – accounting for over two-thirds of the total. This trend reflects both China’s increasing demand for Australia’s resources – particularly iron ore and metallurgical coal – but also the comparatively strong prices for these commodities, a trend that has reversed considerably across 2014 and early 2015, as conditions in China’s industrial sector have slowed.”
“The evolution of China’s growth model means a less resources-intensive export profile for Australia in the longer term. Among other recommendations, the ACBC urge Australian businesses to become more deeply engaged with China’s consumer markets and contribute to China’s value chains as well as partnering with Chinese firms to expand opportunities in services.”
“This view is supported by NAB’s Australia-Asia Business Engagement Index, which highlights the fact that many Australian firms – particularly in the SME space – engage narrowly with Asia, seeking to benefit from lower cost product imports, rather than a broader trade relationship.”
Key Quotes
“The University of Sydney’s analysis in the ACBC report utilises the World Input-Output Database (WIOD), which provides a stronger quantitative basis to determine the contribution. Between 1995 and 2011 (the current range of the database), the contribution of direct trade with China rose continuously, contributing in excess of 5.5% of Australian GDP in 2011.”
“The ACBC report shows that Australia’s two-way trade (imports and exports) with China rose by 17% in 2013, to almost $17000 per household – making China by far Australia’s largest trading partner. In comparison, two-way trade per household with Japan was almost $8000 and the United States totalled just over $6000 in 2013.”
“The majority of Australia’s two-way trade with China has been exports – accounting for over two-thirds of the total. This trend reflects both China’s increasing demand for Australia’s resources – particularly iron ore and metallurgical coal – but also the comparatively strong prices for these commodities, a trend that has reversed considerably across 2014 and early 2015, as conditions in China’s industrial sector have slowed.”
“The evolution of China’s growth model means a less resources-intensive export profile for Australia in the longer term. Among other recommendations, the ACBC urge Australian businesses to become more deeply engaged with China’s consumer markets and contribute to China’s value chains as well as partnering with Chinese firms to expand opportunities in services.”
“This view is supported by NAB’s Australia-Asia Business Engagement Index, which highlights the fact that many Australian firms – particularly in the SME space – engage narrowly with Asia, seeking to benefit from lower cost product imports, rather than a broader trade relationship.”