JP Morgan says China’s reopening could boost Australia’s economy by 1%

Australia’s economy could be no small beneficiary of the end of China’s zero-Covid policy over the next two years, according to JP Morgan.

“China’s shift towards earlier reopening raises questions about the potential implications for the Australian economy,” Tom Kennedy, chief investment strategist at JP Morgan, said in a Saturday report.

Related Investment News

“The greatest potential from the reopening itself sits within the services sector, with China being the largest consumer of Australian tourism and education exports,” wrote Kennedy, noting that gains from further changes to Beijing’s industrial policy would be an exception. .

The firm notes that a full recovery in Australia’s tourism would add 0.5 percentage points to its GDP and a further 0.4 percentage points to international student returns from China – almost a full percentage point to the country’s economic growth.

Although australia woke up Covid-related travel restrictions in place in July last year, its short-term foreign arrivals are still far from pre-pandemic levels.

newest Data by Australia Bureau of Statistics showed that a total of 430,470 short-term visits were made to Australia in October 2022 – 44% lower than levels seen in the same month in 2019, when the country received more than 1 million short-term visitors.

October data released in December showed visitors mostly came from New Zealand, the UK and the US – countries with China not listed in the ABS’ list of the top 10 countries tourists came from.

JP Morgan said that in 2019, China accounted for 15.3% of all inbound tourism to Australia, making it the largest source of short-term visitors. It said the average Chinese tourist spent four times as much as a tourist from New Zealand, Australia’s second largest source of tourist arrivals.

“We expect tourism-related consumption to expand in 2023 and 2024,” Kennedy wrote.

“While the period-adjusted spending number is less striking, real GDP is an aggregate concept and so the absence of Chinese tourism has been a notable headwind,” he said.

according to data from Australian Department of EducationIn 2019, from January to October, more than 253,000 international students came from China. The number so far that year has dropped to about 173,000 in October 2022.

The latest figures show that students from China made up 26% of the total enrollment – ​​the largest share from a single country.

Kennedy wrote, “If education exports to China return to 2019 levels, the real GDP impulse would total 0.4% -pts, a useful impulse in an environment of slowing domestic consumption, although it would offset the decline in growth.” There is no panacea for preventing