Australia to continue to benefit from China demand
The Chinese economy is set for a soft landing, which is good news for Australia as demand for commodities will continue, according to AMP Capital Investors chief economist, Shane Oliver (pictured).
China’s economic data for March revealed a normalisation after the post-global financial crisis (GFC) boom, he stated in his weekly economic report. Gross domestic product growth over the year to the March quarter was 9.7 per cent, down from 11.9 per cent recorded over the same period the previous year. Oliver stated that this also implied a slowdown in the sequential annualised quarterly growth rate to about 9 per cent, “which is probably sustainable on a medium term basis”.
“While annual inflation rose to 5.4 per cent in March, softening food prices and the cooling in GDP and money supply growth suggest that it is likely close to peaking,” he said. “So while further monetary tightening is likely, the monetary tightening cycle is probably close to an end. The key message is that the Chinese economy is on track for a soft landing.”
Australia would benefit from continued demand for commodities, although at a more sustainable pace, said Oliver.
He noted that the NAB Business Conditions survey for March showed Australia business conditions surged to their highest level since March last year, after flood-affected results in the previous two months, consumer confidence rising in April, skilled vacancies rising in April and car sales showing a strong growth of 3.4 per cent in March.
Oliver expected that the Reserve Bank of Australia would keep interest rates on hold while export and import price data was expected to reveal that terms of trade would remain strong.
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