Aust to benefit as Chinese learn to spend

Aust to benefit as Chinese learn to spend

Worries over China’s economy are overdone and Australia is set to benefit hugely as the country’s growing middle class learns to spend rather than save, a leading economist says.

Former ANZ chief economist Warren Hogan has told a tourism conference in Sydney that China’s communist government has been successful so far in managing the transition to a service-led economy, but that the next step is for people to start spending more.

Mr Hogan said the growth in Chinese tourism spending accounted for six per cent of all Australia’s economic growth in the 2014-15 financial year and the importance of visitors from the country will grow further.

“The Chinese underconsume and oversave … and this will not be sustained,” Mr Hogan told Wednesday’s Destination Australia conference.

“The model that the Chinese government is following for its development requires this level of consumption to rise.

“This is going to create vast pools of demand for all sorts of goods and services over the decade ahead.”

Worries over the true state of the Chinese economy were a major driver of the turmoil that wiped billions off worldwide markets at the start of the year, with the benchmark S&P/ASX200 losing more than 10 per cent in the first six weeks of 2016.

But Mr Hogan said the Chinese government was largely doing well in economic management and that the occasional setback was inevitable.

“The US consumer is the single biggest economic entity in the world economy right now and the Chinese consumer will be of an equivalent size within five years,” Mr Hogan said.

The lower Australian dollar has helped make Australia more attractive to overseas visitors and, despite a recent rally on rising commodity prices, Mr Hogan said it is likely to drop to between 65 and 70 US cents by the end of the year.

With a wealth of natural attractions, Australia is well placed to capitalise on increased tourism.

“The world economy is now a service led economy. The growth in goods trade has just stagnated: we’ve got enough stuff,” Mr Hogan said.

“Ageing wealthy populations buy services: they don’t buy TVs, they don’t buy motor vehicles and fridges; they buy experiences.”

Email the Travel Weekly team at traveldesk@travelweekly.com.au

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