Monday 24th October 2016 - 5:41 pm

Trade:where to look now

by Alan Thornhill

Watch the Chinese consumer closely.

That’s the message John Fraser, the Secretary to the Treasury, gave to a Fixed Income Forum in Tokyo today.

And he wasn’t modest about it.

He said Chinese consumers could boost – or weaken – the Australian economy.

But his message was essentially positive.

“Australia is entering its 26th year of continuous economic growth,” Mr Fraser said.

“We did not fall into recession in the aftermath of the global financial crisis of 2008, unlike many economies.

“ And real GDP is growing by 3.3 per cent per annum, faster than every country in the G7,” he added.

So what does the Chinese consumer have to do with all this?

Well, Mr Fraser has a few words for the sceptics, on that issue.

“ Indeed, 8 out of Australia’s top 10 trade partners are in Asia,” he said.

Mr Fraser also noted that with the mining boom now well past its peak, lower levels of of mining investment have already become “a significant drag” on our economy.

And worse is to come.

“ Mining investment is expected to fall by 25 per cent in 2016-17 and a further 14 per cent in 2017-18,” Mr Fraser said.

But he added: “as this detraction eases it is expected that investment in other areas of the economy will pick up, despite uncertainty over the exact pace and timing of this recovery.”

This is where – hopefully – the Chinese consumer – or tourist – comes in.

Or, as Mr Fraser said: “of particular importance – for Australia and the world – are the implications of the transition of the Chinese economy towards a more consumer-driven growth model from its present reliance on investment.’

“ Sustainable growth in China is in our interest and China’s economic transition will present opportunities for Australia.”

“ However, this process is unlikely to be smooth and there is a tension between policies to support short-term growth and the structural reforms required to re-balance the economy.”

Mr Fraser added: “the potential for this transition to lead to a greater-than-expected slowdown in the Chinese economy remains a key risk to Australia, the region and the global economy.”

“We are leveraged into the Chinese economy through many channels,” Mr Fraser said.


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