China boosts Aussie Trade
(14 March 2008 – Australia) The Reserve Bank of Australia governor, Glenn Stevens, says that trade with China will have a greater positive impact than that with any other country.
In a speech delivered to the Australian Treasury Seminar Series in Canberra on monetary policy and inflation, Stevens indicated that the growth in China is part of one of the largest transformations in the global economy for a century.
The rise in Australia’s terms of trade has had a huge boost from the growth in the Chinese economy. He said that this increase in what Australia receives for its exports compared to what it pays for its imports is part of a structural change, and not just cyclical.
However, Stevens indicated that because the event is very expansionary, it is likely to be associated with some risk of higher inflation.
He added that we are seeing a very large change in relative prices in the world economy, and a relative price change that is more important to Australia, in particular, than to almost any other country.
The Australian economy, he concluded, has so far dealt well with a shock of this magnitude and a suitable response is needed via monetary policy to combat the resulting rise in inflation.
The rise in Australia’s terms of trade has had a huge boost from the growth in the Chinese economy. He said that this increase in what Australia receives for its exports compared to what it pays for its imports is part of a structural change, and not just cyclical.
However, Stevens indicated that because the event is very expansionary, it is likely to be associated with some risk of higher inflation.
He added that we are seeing a very large change in relative prices in the world economy, and a relative price change that is more important to Australia, in particular, than to almost any other country.
The Australian economy, he concluded, has so far dealt well with a shock of this magnitude and a suitable response is needed via monetary policy to combat the resulting rise in inflation.
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