Demand from China for Australian commodities will help Australian economy survive better than other economies with the country set to rely on it for years to come.
Paul Xiradis, chief investment officer at Ausbil, said trade tensions remained a risk for markets but that they were likely to be softened towards Australia.
“Geopolitics and trade tensions remain one of the key non-pandemic risks to recovery. A lot has been written about trade tensions between the US and China, and Australia in part. With a new presidency, we may some of these tensions subside. In terms of Australia, we expect some softening of tensions, especially given China’s multi-decade need to source key bulk commodities and metals from Australia.”
This demand from China for Australian commodities would hopefully mean Australia was less affected than it could have been as China’s growth plans until 2035 all require natural resources.
The country was planning to become a ‘technological powerhouse’ as part of its five-year plan from 2021 to 2025 before becoming a global leader in innovation by 2035.
“Of a great advantage to Australia’s recovery relative to the rest of the world is the current resources super-cycle, linked to demand from China, and the resurgence in global demand that is gaining momentum as the world economy recovers. Resources, particularly iron ore, gold and precious metals have been outperformers across 2020, largely on continuing Chinese demand,” Xiradis said.
“Much of the demand from China in fulfilling its coming growth plans will require Australian resources, especially across the bulk materials needed to make steel like iron ore and metallurgical coal, and in base metals like nickel and zinc, and the battery materials that underpin the components used in renewable energy and electric vehicles such as copper, rare earths and lithium.”