The Australian economy is expected to improve by almost 1 percent over the next two years on the back of the inflow of Chinese students and tourists into the country, according to JPMorgan Chase & Co.
The reopening of China after reversing “zero-COVID
” policies “is clearly beneficial for the external accounts and gross domestic product,” with the service sector having the strongest influence, Sydney-based economist Tom Kennedy wrote in a note to clients dated Jan. 7.
Since China is the leading consumer of Australian tourism and education, a recovery of Chinese tourist and student arrivals to 2019 levels may add 0.5 percent and 0.4 percent to Australia’s GDP, respectively, noted Kennedy.
“These numbers are meaningful, though we have already assumed some recovery, and a full return is likely to be spread over numerous quarters, potentially taking until 2024,” he added.
The reopening of the east Asian country and the softening of its relations have comforted concerns over Australia’s economy and inflation in particular.
This unease was heightened when Australia’s central bank raised its key interest rate for an eighth consecutive month in December and showed expectations to tighten policy further in an attempt to cool the hottest inflation in three decades.
The two-year ban on importing Australian coal ended Wednesday, after the Australian and Chinese foreign ministers met last month to reset the frosty diplomatic relations between the two nations.
“To maintain a sound and steady growth, our comprehensive strategic partnership serves the fundamental interests of our two peoples and is good for peace and development in the Asia Pacific and beyond,” said China’s Foreign Minister Wang Yi during the meeting in Beijing.
Furthermore, he was not reluctant to address the strained relations in recent years, admitting “difficulties and setbacks.”
“This is what we do not want to see; the lessons must be learned,” he added.
As the ban eased, it gave hope that the country’s restrictions on wine, lobsters and other commodities may be next to ease.
In addition, the enhanced outlook has boosted stock and currency markets in Australia as they neared their highest market levels earlier in the week since mid-September.
“Perhaps the most important implication from the recent improvement in trade relations is that it reduces the risk of government-imposed bans/restrictions on services exports and paves the way for a recovery in both tourism and education exports from early 2023,” Kennedy said.