Australia would be thrown into a deep recession and face huge disruption if China's economy crashes, according to a new report that points to the potential loss of billions of dollars in income, half a million jobs and the dream of a federal budget surplus.
“Australia sells an enormous amount of coal and iron ore to China and they turn that into steel. If the Chinese economy slows down significantly, then the demand for our iron ore and coal will likely decline and affect commodity prices,” said Dr Denniss.
China is Australia's largest two-way trading partner in goods and services, accounting for nearly one third (32.2 per cent) of our trade with the world. Two-way trade with China grew 6.3 per cent in 2020-21, totalling $267 billion (Australia's global two-way trade declined 5.0 per cent during this period).
The bleak news comes as Australia faces the “weakest” rate of economic growth outside the COVID pandemic since the recession in the early 1990s, according to a Deloitte Access Economics Business Outlook report published this week.
Whole markets will tank or lose significant value and many businesses will likely go bankrupt. The Reserve Bank of Australia will also slash interest rates to begin an emergency economic stimulus, while the government may implement some emergency fiscal measures of its own.
Deposits up to $250,000 in savings accounts and term deposits with Australian banks are protected by the government, so if something were to happen to the bank (which is unlikely), your deposit would be safe. This is part of the Australian Government Guarantee Scheme.
Different economists and financial market commentators have different ideas about what constitutes a 'crash'. Australian property values experienced a downturn in 2022 and prices continue to fall—but predictions of the overall peak-to-trough price decline tend to vary between 15-25%.
GDP growth is expected to slow to around 1¼ per cent over 2023, with GDP per capita declining over the year (Graph 5.4). The weaker near-term outlook relative to three months ago reflects the softness in recent activity data.
"That downgrade is centred on our households, and a 'consumer recession' is now forecast in 2023, with household spending expected to finish the year below where it started. "At a cash rate of 3.6 per cent, most Australians will be just fine. "Many, however, will not.
Australia is China's sixth largest trading partner; it is China's fifth biggest supplier of imports and its tenth biggest customer for exports. Twenty-five per cent of Australia's manufactured imports come from China; 13% of its exports are thermal coal to China.
China buys more of Australia's agricultural produce than any other country. ChAFTA provides Australia with an advantage over our major agricultural competitors, including the United States, Canada and the European Union. It also counters the advantages Chile and New Zealand have enjoyed through their FTAs with China.
Australia Exports to China was US$102.35 Billion during 2022, according to the United Nations COMTRADE database on international trade. Australia Exports to China - data, historical chart and statistics - was last updated on June of 2023.
Low wage growth, a surge in migration and a chronic housing shortage have now produced both a cost-of-living crisis and a housing crisis. According to the National Australia Bank, 40 per cent of renters are dealing with very high levels of financial stress.
Overview In March 2023, China exported $7.32B and imported $13.7B from Australia, resulting in a negative trade balance of $6.39B. Between March 2022 and March 2023 the exports of China have increased by $1.42B (24.1%) from $5.9B to $7.32B, while imports increased by $1.87B (15.7%) from $11.9B to $13.7B.
Australia managed to avoid recession for more than 28 years, including through the Global Financial Crisis of 2007-2008. This represented the longest period of growth without a recession for a developed country since the System of National Accounts was established in 1953. Then, the global COVID-19 pandemic hit.
India registers annual GDP growth of 7.2 pc, making it world's fastest-growing major economy. India's Gross Domestic Product (GDP) grew 7.2 per cent in the financial year 2023, making the country the world's fastest-growing major economy.
The world's 12th largest economy
Strong growth in 2021 solidified Australia's position as the world's 12th largest economy in 2021. Nominal GDP was around A$2.2 trillion (US$1.6 trillion) in 2021. Australia is home to just 0.3% of the world's population, but accounts for 1.7% of the global economy.
New research commissioned by NAB reveals the economic opportunity in Australia's transition to a net-zero economy by 2050. The research, 'All Systems Go' by Deloitte Access Economics, finds around $20 trillion will be invested in Australia's economy out to 2050, regardless of whether we transition to net zero.
Key points. A new report ranks global property markets as fair valued, overvalued or in bubble risk territory. Sydney property prices are overvalued despite recent price falls, the report found. Experts warn prices will not necessarily fall back to levels that would be fair value.
Nationwide prices are expected to rise by approximately 2 per cent by the end of 2023. However, as the RBA potentially cuts interest rates before the end of 2023, demand pressures will contribute to a favourable environment for property prices.
House prices in Australia are extremely high compared to income, relative to other countries. The market is propped up by rules that provide tax deductions for property investment, and by repeated state government bonuses for first home buyers. Furthermore, the supply of new homes is hard to generate.
Banking regulation has changed over the last 100 years to provide more protection to consumers. You can keep money in a bank account during a recession and it will be safe through FDIC insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.
Finance Experts All Say the Same Thing
GOBankingRates consulted quite a few finance experts and asked them this question and they all said basically the same thing: You need three to six months' worth of living expenses in an easily accessible savings account.
Some stock market sectors, like health care and consumer staples, generally perform better than others in a recession. Healthy large cap stocks also tend to hold up relatively well during downturns. Investing in broad funds can help reduce recession risk through diversification.