According to analysts at ANZ, as the global economic backdrop has deteriorated this year with faltering of US-China trade negotiations and with a resolution seems less likely, Australian economy is particularly at risk from heightened global uncertainty and a slowdown in China from a prolonged trade war given its exposure to China through trade.
“In the event that there is a slowdown in global and Chinese growth, the Australian economy will be affected through several transmission mechanisms. Rather than trying to quantify a very uncertain outcome, we consider those mechanisms here.”
“The two main channels will be: a direct impact on GDP through the terms of trade, with implications for the fiscal position a key issue; and a second round effect through business sentiment.”
“We think that, if there is a sharp slowdown in China, the Australian Government will need to forgo its forecast budget surplus in order to proactively support the economy.”