The Australian economy grew 3.3% in the three months to the end of September from the previous quarter, the Australian Bureau of Statistics said on Wednesday.
“As the president of the reserve bank said this morning,‘ we are now around the corner and recovery is underway, ’” Treasurer Josh Frydenberg said on Wednesday, although he added that ‘many challenges remain’ as the rest of the world continues the pandemic with new restrictions.
Canberra’s tensions with Beijing may also cast a shadow over recovery. Speaking to reporters on Wednesday, Frydenberg called the debate with China a “very serious situation.”
“I am very optimistic about the opportunities for our exporters around the world,” Frydenberg said.
Economists, however, say the steady flood of trade has not escalated to the point of posing a real threat to Australia’s economy.
Relations have deteriorated since Australian Prime Minister Scott Morrison called for an international inquiry into the origins of the coronavirus epidemic, which Beijing called “political manipulation.”
Trade struggle “disruptive”
Since then, the two sides have struggled on several issues, including trade. China has cracked down on Australian winemakers with strict tariffs and banned or taxed exports of other products, including beef and barley.
“Any deterioration in the trade relationship is disturbing,” Oxford Economics economists wrote in their report last month. Exports of goods and services in 2019 accounted for 22% of Australia’s GDP. About a third of that went to China.
Economists say the damage is quite subdued as long as tariffs do not spread to larger industries.
“Currently, China’s trade bans target pain points that harm relatively small export sectors such as wine, beef and other areas,” said Hans Hendrischke, a Chinese professor of business and management at the University of Sydney. “These industries could suffer severe damage or even be forced to restructure. This is a problem of political pressure rather than widespread economic pressure.”
Could mining be your next destination?
Mining materials, predominantly iron ore, account for a much larger share of Australian exports. Economists at Oxford Economics noted that 68% of Australia’s raw material exports went to China last year.
Sean Langcake, one of the report’s authors, told CNN Business that such restrictions are unlikely, given how much the Chinese steel industry relies on them.
“We will rework these issues with respect to the Chinese government, as we do now,” Morrison told reporters late last month when asked about these shipments. “Obviously there are tensions there. But those tensions will not be resolved by Australia if it surrenders its sovereignty.”
