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China helps Australia’s economy grow through global slowdown: Deloitte
report
SYDNEY, July 15, 2019 (BSS/Xinhua) – Despite a “global slowdown,”
Australia’s economy has managed to stay afloat thanks to a raft of stimulus
measures and a surge in Chinese demand for commodities, a new report by
Deloitte Access Economics said on Monday.
While Australia has experienced falls in the real estate market, severe
drought, stagnant wage growth and weak consumer spending over the past 18
months, strength in its robust resources sector has not waned.
This, combined with record low interest rates and generous tax breaks that
were introduced by the newly-elected Morrison government should help keep
Australia’s economy on track, Deloitte Access Economics Partner Chris
Richardson said in the firm’s latest Business Outlook for the month of June.
“Overall global growth looks set to stay in the slow lane through the rest
of 2019 and through 2020 as well, though the extent of that slowdown looks to
be contained as central banks start to boost their assistance to growth, and
as government budgets do the same,” he said.
“Remarkably, despite the global slowdown, the world has given Australia a
big pay rise, as China’s stimulus means a surge in the demand for and prices
of Australian coal and iron ore.”
Although Australia’s inflation levels remain subdued mainly because of low
wage growth, Richardson said the country’s central bank is now beginning to
change direction when it comes to monetary policy.
“For years the Reserve Bank of Australia (RBA) thought full employment
meant unemployment of “around 5.0 percent,” but now it thinks unemployment
can go a little under 4.5 percent before wages start to party. Australia can
go stronger-for-longer before inflation revs up,” he said.
“But getting unemployment under 4.5 percent is more than the RBA can do by
itself, so official rates are headed to 0.75 percent or 0.5 percent pretty
fast, and things get more complicated after that.”
“We may be in for a phase in which Australia joins much of the world in
having interest rates very low for some time. That change of tack by the RBA
is keeping the Australian dollar under control despite sky-high commodity
prices.”
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In fact, according to Richardson, weakness in the Australian dollar is
actually helping the nation’s exports stay competitive.
“The falling Australian dollar will gradually provide some renewed
tailwinds (aided by Indian and Chinese student growth). And global commodity
prices are bigger than Christmas, generating such a massive jump in mining
profits that, despite their caution, more miners are considering new
investments,” he said.
“At the state level, China’s striking stimulus has commodity prices riding
high, and that’s helping Western Australia and Queensland get their mojo
back.”
“China is doing its darndest to spark a recovery in Western Australia, with
the state’s miners now adding capacity and hiring workers in iron ore, gold
and lithium,” Richardson added.
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