As the Australian economy transitions away from resources, it is well-placed to benefit from increased demand from China. Indeed, the growth of China’s economy has already provided significant benefits to Australia. Chinese demand was a key driver of the resources boom that delivered a temporary but significant boost to Australia’s income over the last decade.
Rising incomes and a growing middle class is supporting a new wave of growth in Australia. Increasing affluence among Chinese consumers has boosted discretionary spending on many items including quality food and health products, attractive holiday destinations and internationally esteemed education institutions. Australia is well placed to supply these goods and services because of our geographic positioning, highly skilled workforce, and regulatory and policy settings that support the perception of quality in our products.
In recent years, foreign investment has helped Australia make the most of the resources boom. With the investment phase behind us, Australia will look to foreign investment to fund new sources of growth in the industries in which we hold a comparative advantage. While the majority of foreign investment in Australia continues to be held by the United States (27% of foreign investment or $861 billion) and the United Kingdom (16% of foreign investment or $516 billion), China has recently emerged as a significant new source of investment. Indeed, Chinese investment in Australia quadrupled in value between 2010 ($19 billion) and 2016 ($87 billion). Importantly, the majority of new Chinese investment is in services and consumption-led activities such as health, tourism and agribusiness, assisting Australia in its transition to towards broader sources of growth.
This report notes that while Chinese investment may currently be at relatively low levels, if Australia is to continue to benefit from the growth of China (as we did during the mining boom) we will need to facilitate further capital inflows to ensure that our industries have the scale and ‘China-readiness’ to take full advantage of these opportunities.