The RBA is worried the slowdown in China’s economy could hurt Australia as the OECD warned the Chinese government may have limited tools to counter it.
Board members discussed at length the economic situation in China – Australia’s largest two-way trading partner – including its faltering property market and flagging growth.
The central bank is also closely monitoring how quickly inflation falls, and discussed the persistence of local services price inflation, noting the recent rise in petrol prices could make the task of getting inflation back to the bank’s target range of 2-3 per cent uneven. OECD modelling showed an unexpectedly large drop in China’s economic growth of 3 percentage points could directly cause global economic growth to fall by 0.6 percentage points, and countries with strong trade links with China “would be relatively hard-hit”.
Treasurer Jim Chalmers said the OECD report showed the global economy was in “an unpredictable place”.“High interest rates, persistent inflation and the slowdown in China, particularly its struggling property sector, are all weighing on the global outlook,” he said.
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