Australia's economic growth may be stifled by the dispute with China

Australia's economic growth may be stifled by the dispute with China

The growth of the Australian economy will probably never return to the level before the onset of the new coronavirus pandemic, Capital Economics said. According to it, the reason is the escalating trade conflict between Australia and China.

More than a third of China's share of Australia's exports

China is Australia's largest trading partner. It has accounted for more than 39 per cent of Australian goods exports in recent years and almost 18 per cent of services exports. In recent months, however, Beijing has tightened imports and imposed import duties on several Australian products, including wine and barley. At the same time, it suspended the import of beef from Australia. According to Capital Economics, whose report was published by CNBC, only the goods and services currently targeted by Beijing account for almost a quarter of Australia's total exports to China. If China continues to impose import duties and other Australian products are affected, it will do considerable damage to the Australian economy.

A questionable return to the original performance of the economy

Bilateral relations between China and Australia deteriorated significantly earlier this year, with Canberra supporting US calls for an independent investigation into China's actions at the start of the new coronavirus spread. "Although Australia may shift some of its exports to other markets, which would ease the pressure on the economy, the escalating trade dispute with China is one of the reasons why Australian economic growth may never return to pre-pandemic levels. Even if the pandemic can be managed, "said Marcel Thieliant, an economist at Capital Economics.

Australian exports hold iron ore exports

The only bright spot in the current dispute for Australia is the export of iron ore. Australia is the largest producer of this raw material. However, Beijing is not expected to restrict these imports. This is due to China's high dependence on iron ore imports from Australia, which accounts for more than half of China's total demand for this product. As China has few alternatives, it is currently omitting iron ore from sanctions against Canberra.