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Chinese student and tourist arrivals may add nearly one percentage point to Australia’s economic output over the next two years, according to JPMorgan Chase & Co.
China’s reopening after Covid-zero “is clearly beneficial for the external accounts and gross domestic product,” with the most potential coming from the services sector, Sydney-based economist Tom Kennedy wrote in a note to clients dated Jan. 7.
A gradual restoration of tourist and student arrivals to 2019 levels may add 0.5% and 0.4% to GDP respectively, he added, given that China is the largest consumer of Australian tourism and education exports.
“These numbers are meaningful, though we have already assumed some recovery,” Kennedy wrote, “and a full return is likely to be spread over numerous quarters, potentially taking until 2024.”
China’s reopening and a recent thawing in relations have helped to dampen concerns over Australia’s economy after the Reserve Bank of Australia hiked interest rates to a 10-year high to cool the hottest inflation in three decades.
On Wednesday, China signaled the end of a two-year ban on importing Australian coal, fueling sentiment that its restrictions on wine, lobsters and other commodities could be next to ease.
The improved outlook has lifted Australia’s stock and currency markets with the Aussie nearing its highest since mid-September earlier in the week.
“Perhaps the most important implication from the recent improvement in trade relations is that it reduces the risk of government-imposed bans/restrictions on services exports and paves the way for a recovery in both tourism and education exports from early 2023,” Kennedy wrote.
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