(Bloomberg) -- Australia will invest more to find new buyers for its exports in an effort to ease trade dependence on China, its treasurer said, in the face of “economic coercion” from Beijing that shows little sign of abating.
In an interview with Bloomberg, Josh Frydenberg said the government was “investing more in trade diversification” after China subjected products ranging from coal to barley, lobsters and wine to punitive trade actions.
“We are now, for example, sending more barley to Saudi Arabia, more wine into Singapore,” he said Thursday. “So even though Australia has been on the receiving end of economic coercion from China, we have been able to diversify our suppliers to and our exports to other countries.”
Yet China still takes about three-times more Australian goods than its nearest rival, Japan, and at its peak bought almost 40% of total shipments. China's trade reprisals began after Prime Minister Scott Morrison called in April 2020 for an investigation into the origins of Covid-19, a highly sensitive subject for Beijing as it potentially impinged on Chinese sovereignty.
Australia has long been one of the developed-world's most China-dependent economies, leaving it vulnerable in the event of an economic crisis in its key trading parter, or a deterioration in relations.
But Frydenberg said the government was “always conscious of the geopolitical risk and its impact on exports and the economy.”
It is now “investing more in supply chain resilience and that's everything from manufacturing mRNA vaccines here in Australia to ensuring that our fuel securities maintained,” he added.
On Tuesday, the treasurer handed down his fourth budget as the nation's top economic official and his last before a May election. The ruling Liberal-National coalition trails the opposition Labor Party in opinion polling and is looking for a boost from the fiscal blueprint.
While Frydenberg forecast strong economic growth and low unemployment for Australia, wages are expected to increase at a more tepid rate in the short term, squeezing households struggling with accelerating inflation.
Frydenberg said low unemployment, currently 4%, would drive wage gains over time and added that inflation in Australia was “still well below other comparable countries like the United States and like the United Kingdom and Canada, and New Zealand.”
When asked about Australia's high debt, left over from record spending to help the economy through the pandemic, the treasurer said foreign investors should have confidence that it was at “manageable” levels.
“The budget showed that debt as a share of GDP would peak four years earlier and more than 5 percentage points lower than previously forecast,” he said.
What Bloomberg Economics Says...
The budget's “major spending decisions were temporary payments to help offset cost-of-living pressures and a reduction in fuel excise taxes. These may be popular with voters but are insignificant in terms of the macroeconomy.”
-- James McIntyre, economist
For the full report, click here.
Frydenberg rejected suggestions that his budget had ignored the threat of climate change, despite little funding in the budget to limit emissions and criticism from environmental groups. Australia's Climate Council called it a “massive lost opportunity.”
It was also delivered against the backdrop of increasingly extreme weather, with eastern Australia in the midst of massive flood events.
Hollywood A-List's Favorite Australia Town Submerged by Floods
The treasurer said Australia was investing more in “clean hydrogen” and hydroelectric projects. “We'll meet and beat our Paris commitments,” he said, referring to the international agreement adopted in 2015.
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