According to JPMorgan, the end of China’s zero-covid policy over the next two years could benefit Australia’s economy significantly.
“China’s shift toward an earlier reopening raises the question of potential implications for the Australian economy,” JPMorgan’s chief investment strategist Tom Kennedy said in a Saturday report.
“The largest potential upside from reopening itself sits within the services sector given China is the largest consumer of Australian tourism and education exports,” Kennedy wrote, noting that benefits from further changes to Beijing’s industrial policy would be an exception.
According to the firm’s note, a full recovery in tourism in Australia will add 0.5 percentage points to the country’s GDP, and the return of international students from China will add another 0.4 percentage points, totaling nearly a full percentage point in economic growth.
Despite the fact that Australia lifted Covid-related travel restrictions in July of last year, short-term overseas arrivals remain far below pre-pandemic levels.
According to the most recent Australia Bureau of Statistics data, 430,470 short-term trips were made to Australia in October 2022, which is 44% lower than the same month in 2019, when the country received over 1 million short-term visitors.
The ABS data for October, released in December, showed that visitors mostly came from New Zealand, the United Kingdom, and the United States — arrivals from China were not listed among the top ten countries from which tourists came.
According to JPMorgan, China accounted for 15.3% of all inbound tourism to Australia in 2019, making it the largest source of short-term visitors. It went on to say that the average Chinese tourist spent four times as much as a visitor from New Zealand, Australia’s second-largest source of inbound tourists.
“Our expectation is for the tourism-related consumption impulse to be spread over 2023 and 2024,” Kennedy wrote.
“While the duration adjusted spending numbers are less striking, real GDP is an aggregate concept and so the absence of Chinese tourism has been a notable headwind,” he said.
JPMorgan anticipates an increase in international student enrollments this year.
According to the Australian Department of Education, more than 253,000 international students arrived from China between January and October of this year. In October 2022, the year-to-date figure will be around 173,000.
According to the most recent data, Chinese students made up 26% of total enrollments, the highest percentage from a single country.
“If education exports to China revert to 2019 levels, the impulse to real GDP would total 0.4%-pts, a useful impulse in the environment of slowing household consumption though not a panacea to prevent a growth deceleration,” Kennedy wrote.
(Adapted from TheWest.com.au)