Australian economy more reliant on China: Reserve Bank of Australia

08:59, September 17, 2010      

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Australia's economic strength is no longer marching in step with the U.S. economy, and is instead increasingly reliant on China, Reserve Bank of Australia (RBA) said on Thursday.

Over the past decade it had become apparent Australia's economy was growing in step with China, a major consumer of Australia's natural resources.

"A decade or so ago, we spent a lot of time puzzling over why quarterly movements in Australian gross domestic product (GDP) were so highly correlated with quarterly movements in U.S. GDP," RBA assistant governor Philip Lowe said in a speech at NatStats 2010 conference in Sydney.

"We don't puzzle over this anymore - not because we solved the puzzle, but because the correlation has fallen.

"At the same time, the correlation between quarterly movements in Australian and Chinese GDP has steadily increased.

"Clearly what happens in the Australian economy is now more dependent upon what happens in China than has been the case at any time in our past."

According to The Australian newspaper, Lowe said the farming sector could benefit as global demand for food, particularly in China and India, grew.

"Over the years ahead it is quite likely that global demand for protein will grow strongly, particularly if India and China continue on their current paths," he said.

"With Australia's strong history of agricultural production, this is another area where we have an advantage."



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