Oliver's Insights - May 09

China's economic recovery and Australian employment data

Shane Oliver looks at the signs of recovery in China and whether it is sustainable or not. The key points are as follows:

• China’s economy is recovering off the back of a combination of fiscal and monetary stimulus and signs the export slump is easing.
• China’s low per capita consumption, low household debt levels, rapid urbanisation, low public debt and relatively sound banking system are structural tailwinds for growth going forward.
• Chinese shares have had strong gains from their lows but are still well down from their 2007 highs and offer good long term value.
• Australia will be a beneficiary of the domestic demand-driven recovery in China now underway.
  
  
  But while the upswing in China is good news for Australia...
  ...it would be dangerous to read too much into Australian labour market data for April showing a 27,300 rebound in employment and a fall in the unemployment rate to 5.4%. The month to month labour market data can be very volatile and forward looking labour market indicators such as job advertisments and hiring plans in business surveys along with all the anecdotal evidence of layoffs all point to a sharp fall in employment and much higher unemployment going forward.

090511 Olivers Insights May 2009.pdf(70 Kb)