URGENT UPDATE: The Reserve Bank of Australia’s (RBA) Governor, Michele Bullock, has just announced that a significant slowdown in the Chinese economy is a major concern for Australia, following a downgrade in growth prospects for its largest trading partner. This development could have profound implications for Australia’s economy, particularly affecting iron and coal exports.
In a statement to Senate estimates earlier today, Bullock emphasized that any decline in Chinese manufacturing, particularly if exacerbated by escalating trade tensions with the United States, could lead to a ripple effect in Australia’s economy. “China is such an important part of our trade relationships, accounting for 30 percent of our exports,” Bullock stated. “What happens in China is very important to us.”
The RBA’s concerns come amidst a grim outlook for China’s real estate market, which Bullock noted remains “very much in the doldrums.” While Chinese authorities are attempting to stimulate consumer demand through subsidies, the overall risk to China’s growth trajectory remains high. The OECD has sharply reduced its forecast for China’s GDP growth to 4.4 percent in 2026 and 4.3 percent in the following year.
This news is critical for Australia, as the RBA anticipates that the domestic GDP growth rate will reach 2.3 percent in both 2026 and 2027, driven by higher disposable incomes. However, Bullock warns that persistent inflation, which surged to 3.8 percent in October, could complicate monetary policy moving forward. “The board is looking very hard at these recent numbers to determine whether the inflation pressures are temporary or more permanent,” she explained.
As inflation rates hover above the RBA’s target band, the central bank is on high alert. Bullock stressed that if inflation remains elevated for an extended period, it could entrench inflation expectations, impacting future monetary policy decisions.
The urgency of these developments cannot be overstated, as global economic pressures continue to mount. The interplay between China’s economic health and Australia’s trade dynamics is crucial, not just for policymakers but for businesses and consumers alike. The RBA’s next steps will be closely monitored in the coming months as they navigate these turbulent waters.
Stay tuned for more updates on this developing story as the economic landscape unfolds.
