‘Worrying Signs’: Treasurer Says Australia Keeping Close Eye on Chinese Economy

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‘Worrying Signs’: Treasurer Says Australia Keeping Close Eye on Chinese Economy

July 16th, 2023

Awake Goy

Australian Treasurer Jim Chalmers warned that global economic uncertainty is expected to slow the Australian economy “considerably,” noting that the Chinese economy was displaying “some worrying signs.”

“I’m not going to pretend otherwise. There have been some developments out of China that we are monitoring incredibly closely,” Mr. Chalmers told the national broadcaster ABC’s Insiders program on Sunday morning.

“The global economy is [in] a pretty precarious place right now. Americans are proving to be resilient, the Chinese economy has shown some worrying signs, Europe’s in recession, and others as well.”

With the Australian economy expected to slow down, the Treasury is forecasting a moderation of inflation and an uptick in the unemployment rate.

“I’ve been upfront about that. The challenges in our economy are substantial—global and domestic,” Mr. Chalmers said.

“I think the slowdown in our economy is expected in those forecasts to be significant, and that will have implications for the unemployment rate.”

Mr. Chalmer’s comments come just ahead of new unemployment data, to be published on July 20. The latest June figures show a surprise decrease to 3.6 percent when many were expecting the numbers to remain steady.

“We’ve got an incredibly resilient labour market. It’s one of the big strengths that we have going into this period of global economic uncertainty,” he said.

He added that there would be debate among economists about what full employment would look like in the current economy.

Some economists, such as incoming Reserve Bank of Australia (RBA) Governor Michele Bullock, have suggested that Australia has in fact achieved, or may even be above, the estimates for full employment.

However, an extremely low unemployment rate can be unsustainable, the RBA says, as it drives inflation and wage growth.

“Our assessment is that, for the first time in decades, firms’ demand for labour exceeds the amount of labour that people are willing and able to supply. That is, employment is above what we would consider to be consistent with our inflation target,” Ms. Bullock said in June.

On Ms. Bullock’s appointment as new head of the RBA, Mr. Chalmers spoke highly of her qualities.

“Michelle is an outstanding economist, she is a respected leader, and I think that she will run the Reserve Bank in a really inclusive way,” he said of the Albanese government’s decision not to reappoint outgoing Governor Philip Lowe for a second term.

Australian Reliance on China Falling

A failing Chinese economy could have a significant impact on Australia, as China is its biggest trading partner.

However, after the Chinese Communist Party (CCP) imposed trade impediments on a list of Australian exports—in retaliation for the Turnbull and Morrison governments’ tough-on-CCP policies, including demanding independence investigations into the origins of the COVID-19 pandemic—a significant portion of Australian exports have found they have been able to successfully diversify away from China.

Analysis of export data from the Australian Bureau of Statistics (ABS) by the Australian Strategic Policy Institute (APSI) showed that China accounted for 29.5 percent of Australian exports in August 2022—down from 42.1 percent in July 2021.

APSI senior fellow David Uren noted that most of the industries hit by Chinese sanctions, except the wine and lobster industries, were able to thrive in new markets. This illustrates the resilience of Australia’s economy on the chance that it is confronted with a loss of exports to China, analysts have noted.

Meanwhile, various economic figures illustrate China’s current rapid economic downturn, including a growing crisis in youth unemployment and diminishing export data, as well as admission of concern by high-ranking Chinese Communist Party officials.

Chinese Premier Li Qiang blamed foreign countries for China’s economic problems, reported Chinese state media, while asserting that the Chinese economy was showing a “positive trend of recovery” under Chinese leader Xi Jinping’s leadership.

Chinese Economy Stuttering Under CCP

China’s official youth unemployment figure was 20.8 percent in May. However, this data does not include the Chinese youth who have completely withdrawn from the labour market and are not seeking employment—which is estimated to be about two-thirds of China’s 100 million young urban population.

A professor from a private college in Guangzhou, who spoke to The Epoch Times on condition of anonymity for personal safety, said the official figures were likely fake and could be as high as 80 percent.

She said that only two of the 350 graduates in her department this year had found jobs.

Many students are also employed on paper but in reality don’t have work, she added.

Milton Ezrati, chief economist for the New York-based communications firm Vested, added that China’s youth unemployment issue is “self-inflicted.”

“Had Xi been true to his ambitions to have a service, knowledge economy … this problem would probably exist, but not be nearly as severe,” he previously told The Epoch Times.

“At the same time as [Xi] talked about a knowledge economy and a service economy, he put great stress on effectively cornering the market in certain crucial industries, such as chip manufacturing and electric vehicles and batteries.”

State-approved data from China’s Customs Bureau on July 13 reported that exports dropped by 12.4 percent year-on-year in June, which followed a 7.5 percent drop in May.

Imports also fell nearly 7 percent, nearly double the rate of the expected 4 percent decline.

Lyu Daliang, a spokesperson for the General Administration of Customs, blamed China’s poor export performance on weaker global trade and investment and geopolitics, particularly with the United States.

Terri Wu contributed to this report.

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