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Media Release - Australian Centre for Financial Studies
09 September 2016

The Long Boom: What China’s Rebalancing means for Australia’s Future

Australia’s services sector may be the largest beneficiary of China’s rebalancing in the future, according to a new research report prepared by the Australian Centre for Financial Studies (ACFS), a centre of Monash Business School.

The report, titled “The Long Boom: What China’s Rebalancing means for Australia’s Future”, was commissioned by the Australia China Business Council and supported by ShineWing Australia.

China is Australia’s largest two-way trading partner by a significant margin. Not only does China claim nearly 25% of Australia’s two-way trade, but the value of this trade is nearly double that of trade with Japan – Australia’s second-largest individual trading partner.

While Chinese demand has helped propel a period of impressive export performance in Australia, China’s headline GDP growth rate is now slowing. The composition of its economy is also changing. The rotation of its economy away from investment-heavy, manufacturing-led growth and toward consumption and services-led growth is commonly referred to as ‘rebalancing’.

To assess the implications of this rebalancing, the report utilises econometric modelling to estimate the impact of three conceivable ‘scenarios’ for Chinese demand on the Australian economy. Under these scenarios, by 2026 China could account for:

•    42-47% of Australia’s healthcare and social assistance export market;
•    36-41% of the educational and training export market;
•    30-35% of the accommodation and food services export market;
•    16-19% of the financial and insurance services export market; and
•    11-13% of the construction export market.

The projections also suggest that Chinese rebalancing may lead to significant employment gains in the education and tourism industries. Furthermore, higher inbound Chinese direct investment could create tens of thousands of new jobs in the local construction industry.

Services already account for around 75% of Australia’s economic output. Given the dominance of the services sector in Australia – and the fact that service industries are typically more labour-intensive than mining – growth in services exports to China offers the potential for broad-based economic gains.

Increased demand from China, however, cannot be taken for granted. The projections are contingent on policy decisions, such as those concerning export finance and foreign investment screening. Tapping into Chinese demand may also require changes to industry practice and thinking.

Professor Rodney Maddock, ACFS Executive Director, said: “The Chinese economy is now so big that, even with lower growth rates, its impact on our economy gets bigger and bigger. The most likely winners are the service industries: tourism, education and health.”

The report was launched by the Hon John Brumby, National President of ACBC, at an event on 7 September 2016. Mr Brumby moderated a panel discussion featuring Professor Maddock and Professor Edward Buckingham, Director of Engagement at Monash Business School.

ACFS would like to thank Dr Janine Dixon, Senior Research Fellow at the Centre of Policy Studies at Victoria University, for her detailed work and advice on computable general equilibrium (CGE) modelling of the Australian economy.
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Contact Details:   

Rodney Maddock

Interim Executive Director, Australian Centre for Financial Studies
+61 417 554 149 | | Twitter: @australiancfs | LinkedIn:@australiancfs

About ACFS
The Australian Centre for Financial Studies (ACFS) is a part of Monash Business School. It aims to facilitate industry-relevant, rigorous research and independent commentary, drawing on expertise from academia, industry and government to promote thought leadership in the financial sector. Together, ACFS and Monash Business School aim to boost the global credentials of Australia’s finance industry, bridging the gap between research and industry and supporting Australia as an international centre for finance practice, research and education. 

ACFS Code of Research Conduct
ACFS conducts independent research and thought leadership into issues related to the financial sector. Contracted research may be undertaken for industry research partners, or more commonly, for the purpose of generating public debate about issues of importance to the sector and the wider community. The strength of ACFS research is that it is well informed by industry practice and input, and is undertaken with a high level of expertise, by ACFS research staff and by drawing on our wide network of academic and practitioner contributors. We produce accessible and relevant research that is non-partisan, and non-sectoral in its perspective. While we welcome a diversity of views, the value of our work is underpinned by its independence.
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