Dancing with the dragon

China's huge appetite for resources is reshaping the Australian economy.

This Lowy Institute International Economy Comment argues that the China-led rise in the terms of trade is reshaping the Australian economy in a wide range of ways, contributing to an increase in national income (and hence Australian living standards) and a change in the structure of national comparative advantage; delivering a big boost to state and federal government tax receipts and a bonanza for the resource sector companies that comprise a significant proportion of the Australian share market; exerting upward pressure on the (nominal and real) exchange rate; and sparking a major investment boom in the mining sector.

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