Australia has emerged as the “world’s biggest winner” from
the US-China trade war, with surges in iron ore and coal prices supporting the
first current account surplus in more than four decades.
Amid a thawing in the trade standoff between the superpowers
at the weekend, a new Deloitte Access Economics Business Outlook report
highlights “pain in our economy has been home-grown”.
The report, titled Oz Muddles through Global Uncertainty,
warns that although global events had helped the economy, “that could change
fast” and cited the housing market slump, consumer confidence and drought as
negative growth factors.
landscape is littered with worrying risks. But neither the drought nor the
housing downturn are here to stay and there’s already stimulus via cuts to
taxes and to interest rates, plus a lower $A,” Deloitte Access Economics
partner Chris Richardson said. “And housing prices are now rising, which may
limit the damage housing does to the economy from here on. So absent a spanner
in the works from a global threat, Australia should keep muddling through the
aftermath of a housing bubble and a drought.
“Growth won’t be flash but it should slowly lift. Yet that
recovery looks unlikely to develop sufficient momentum to see wages accelerate
or to see unemployment fall much over the coming year.”
In his report, Mr Richardson said the “world has been giving
Australia a pay rise amid a global slowdown”. “That’s never happened before. It
means Australia has been the world’s biggest winner from the trade wars and the
slowdown in China,” he said.
“That marvelous combination has given us the first current
account surplus in more than four decades. But wait, there’s more. Borrowing
costs have collapsed. That’s a big benefit for a nation with a trillion dollars
in global debt, with the savings from that building substantially over time via
a lower net income deficit.”
Trade Minister Simon Birmingham on Sunday welcomed the
progress in talks between US and Chinese negotiators, and said easing trade
tensions could “only help to lift global economic confidence”.
As part of the truce, US President Donald Trump said planned
tariff increases on Chinese goods would be scrapped, with Beijing committing to
buying $40bn-$50bn worth of US farm products. “We will examine the details of
any agreement when they are released. Initial products mentioned don’t pose any
significant concerns to Australia and we hope that any agreement is consistent
with World Trade Organization rules,” Senator Birmingham said.
“We strongly back the competitiveness and quality of our
exporters to compete on fair terms with any other nation, including the US.
Through our free-trade agreements with both the US and China, Australian
exporters are well positioned to continue to enjoy strong access to sell goods
and services in both markets.”
The Australian understands that while there is limited
detail on the US-China agreement, it is expected the soybean and pork sectors
would feature prominently.
The Deloitte Access Economics report said Australia’s fiscal
finances had improved as rising house prices and commodity prices boosted
state and federal taxes, with delays in the NDIS rollout slowing spending.
Mr Richardson said despite these factors, there remained“fragility
about revenues” and a heightened focus on budget surpluses. “They rely on two
trends whose sustainability is suspect: Chinese stimulus and housing price
rises in Australia,” he said.
“That’s why there’s a risk that this is just five minutes of
surplus sunshine in the nation’s fiscal finances, as the states in particular
move back into deficit.”
Opposition Treasury spokesman Jim Chalmers said the report forecasts “below-trend growth of 2.2 per cent in 2019-20, well below the Morrison government’s budget forecasts”.
THE AUSTRALIAN NEWS: Tuesday, October 15, 2019.