How The World's Weakening Economy Affects Australia
The latest World Economic Outlook projections of slowing global growth -- especially China's economic downturn -- do not bode well for the average Australian.
Federal treasurer Josh Frydenberg boasted about Australia's "27 years of uninterrupted growth" during his recent Economic Plan address.
He referenced how many Aussies had "never experienced recession in their working lives", with the majority of today's population now born after 1980.
Frydenberg's speech followed news of uncertainty in global economic growth and, most significantly, China's slowest economic numbers in three decades.
This weakening global expansion will "significantly impact Australians" and the local economy in the long-term, according to IBISWorld senior industry analyst Jason Aravanis.
"Should a recession occur, immediate impacts would include higher unemployment and low wage growth," he told 10 daily.
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Australia avoided recession during the Global Financial Crisis in 2007-2008, which allowed the government to spend and borrow to provide stimulus to the economy, and for the Reserve Bank to cut rates to promote investment.
Fast forward to today, and Australia finds itself in a different position: in debt but with low interest rates.
"This means that if another global recession were to occur, Australia would be less able to shield itself from the worst effects," Arvanis explained.
Because China is Australia’s largest two-way trading partner and one of our largest foreign investors, their economic slowdown could be a significant hit to the local market.
The China slowdown could lead to lower demand for Australia's major exports like iron ore, coal and natural gas, plus beef, wine, grains and other agricultural products.
China's trade fight with America has worsened their faltering economy, with 2018's 6.6 percent growth rate the country's slowest annual pace since 1990.
Their economic slow down also means Chinese people are less likely to commit to expensive overseas travel.
"This would negatively affect education -- Chinese students are a major source of students for Australian universities -- and tourism," Arvanis said.
Australia needed to now "energetically seek to attract other markets" besides China, University of Technology's senior lecturer in tourism, Dr. David Beirman said.
"China represents one sixth of our international visitors and one quarter of our $44 billion international tourism income," Beirman told 10 daily.
"Australia has benefited from incredible year-on-year growth in Chinese visitor arrivals and visitor spending over the past eight years. I don’t think growth will stop, but it is almost certain to slow."
International trade conflicts, policy uncertainty and geopolitical issues have influenced the slowing growth of the world's economy.
Over 1300 global CEOs noted a major drop in optimism regarding global economic growth, according to a new survey from PricewaterhouseCoopers.
Nearly 30 percent of business leaders agreed growth will decline in the next 12 months, six times the number (five percent) recorded last year.
“The CEOs’ views of the global economy mirror the major economic outlooks, which are adjusting their forecasts downward in 2019,” PwC's Global Chairman, Bob Moritz, said in a statement.
“With the rise of trade tension and protectionism, it stands to reason that confidence is waning.”
Dr Beirman suggested Australia's concerns about the rest of the world "should be greater than they are with China".
"Much of the world is experiencing economic slowdown and uncertainty, Brexit being a good example. When this happens, people tend to stop buying and investing. This impacts on housing prices, etc," he said.
"For tourism in particular, the spectacular growth in global tourism we have enjoyed over the past few years is more than likely to slow during 2019."