Australia has been insulated from the worst effects of the US-China trade dispute but would likely suffer from a longer-term breakdown in relations between the economic giants.
Reserve Bank deputy governor Guy Debelle told an audience in Sydney on Thursday that Australia’s status as an exporter of resources rather than components meant it was more exposed to China’s domestic economy than its exports.
The RBA estimates that overall fiscal stimulus in China is probably about 2015 levels, with that directed at steel-intensive parts of the economy such as infrastructure.
Mr Debelle said this had boosted demand for coal and iron ore, which has benefited Australia, particularly as the local dollar had dropped in value.
“But Australia has been a major beneficiary from the rules-based global trading system over many decades,” Debelle told the annual Risk Australia Conference.
“The current threats to that are clearly a major risk for the Australian outlook over a longer horizon.”
Speaking before the ABS released data showing the jobless rate was unchanged at 5.2 per cent in July, Mr Debelle reiterated the Reserve Bank’s view that near-side downside risks remain to household consumption.
However, he said the medium-term outlook was more balanced amid signs that property price declines had bottomed out.
“If this is the case, the drag from declining wealth and turnover will dissipate,” Mr Debelle said.
“Housing market conditions may even start to support consumption growth again in the period ahead.”
He also repeated his comments from this year that risk managers need to properly assess the impact of climate change as opposed to cyclical weather events.
“‘What will be the effect of climate change on the price of an asset my company owns, particularly if it is a long-lived asset such as, for example, a mortgage?'” Mr Debelle said.
“Transition risk is about the potential effects to businesses as the country and the economy adjusts to the changes in the climate.”