Australia's economic future linked to Asia: bank official

15:40, October 19, 2009      

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Australia's long-term economic future is linked to the performance of Asian economies, especially China and India, the Reserve Bank's assistant governor, Philip Lowe told a conference on Monday.

Lowe told the Citi Australian Investment Conference in Sydney that Asian growth had saved Australia from a technical recession, and was likely to boost the local economy into the future.

"Amongst the main developed countries, Australia is the only one that has not recorded a negative year-ended growth rate during the global downturn. It is also the only one which has not recorded a drop in its export volumes," he said.

"As we look beyond the challenges of the global recession, if one is optimistic about the medium-term prospects for growth in Asia, then there are reasonable grounds to be optimistic about medium-term prospects for the Australian economy," he said.

Lowe stressed that Australia's economic prospects are more closely aligned with Asia's led by China "than has been the case ever before."

Asia's demand for Australian resources, along with the relative health of the local banking sector, has helped the local economy avoid the worst impact of the financial crisis in the past year.

Lowe noted Asia's growing economic strength with propping up Australia's terms of trade - or prices paid for exports versus prices paid for imports - about 50 percent higher than the average level over the 1980s and 1990s.

"This strength in our terms of trade would certainly have come as a surprise to many of the commentators of earlier decades who thought that the prices of Australia's exports would inexorably decline relative to the prices of our imports," he said.

Australia's four most important merchandise export destinations this year have been China, Japan, South Korea and India, according to Lowe, with the U.S. ranking the fifth.

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