China rebound defies predictions of gloom
Authorities will need to tackle a growing tangle of opaque financing. Photo: Reuters
THE pace of growth in China has started to accelerate, confounding sceptics and confirming the ongoing recovery of Australia's most important trading partner.
China's rebound has underpinned a recovery in commodity prices, particularly iron ore, after falling prices had dented Australia's terms of trade during the year.
If sustained, China's renewed economic vigour and the rise in commodity prices will help the federal government avoid a major blowout in the budget deficit and fund its education disability insurance reforms, signature policies in an election year.
China's December quarter GDP growth rate of 7.9 per cent was faster than expected and up from the three year low of 7.4 per cent recorded in the September quarter.
The surge is welcome news for federal Treasurer Wayne Swan, who used a speech in New York overnight to declare he was "cautiously optimistic" about the state of the global economy, and believed 2013 could be a better year for the global recovery if governments supported jobs and growth.
He said Australia was well-placed to benefit from China's continued strong growth, and he affirmed the government's commitment to its Gonski education reforms and the National Disability Insurance Scheme.
This was despite the multi-billion-dollar hits to budget revenue last year that "made a surplus unlikely this year."
"The International Monetary Fund expects our economy to outperform every major advanced economy this year and next," he said.
"We're in the right place at the right time as Asia drives more and more of the world's economic growth. So the opportunities for Australia are huge if we get our settings right," he said. The Treasurer said he was determined to have a "positive debate" in Australia this year despite the challenges facing the country.
"Endless pessimism is in itself a risk to the global economy, just as it weighs on business and consumer sentiment in Australia's economy."
"I am determined to have a positive debate in Australia in 2013 about how we lock in the gains we've made in the last five years, and set our economy and our community up for the next five years."
Stephen Joske, an economist and investment strategist in Beijing for Australian Super said the strong momentum in China showed the commodities boom, which has underpinned Australia's economy for nearly a decade, was not over but merely shifting to a new phase.
"The big-picture message is that all that talk last year about a hard landing in China, which was dominating thinking at one stage, was completely wrong," Dr Joske said.