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Grim shortage warning due to Covid explosion in China and how they could devastate Australia’s economy
- China’s huge surge in Covid cases will have a ‘substantial impact’ on Australia
- Personal protective equipment, chemicals and mining machinery that will be affected
- The Covid explosion in China is one of the ‘key risks’ for the Australian economy in 2023
The huge increase in coronavirus cases in China since ending its zero-Covid policy is likely to have a “substantial impact” in Australia, Treasurer Jim Chalmers has warned.
The Covid explosion in China, Australia’s biggest trading partner, could lead to shortages of personal protective equipment (PPE), chemicals and mining machinery.
“When you have a wave of covid like we’re seeing in China…that has obvious consequences for the Chinese workforce and for supply chains around the world,” Chalmers said.
The treasurer said the spillover effect of Covid in China was one of the “key risks” for the economy in 2023, due to Australia’s reliance on its markets and workforce.
The huge rise in Covid cases in China since ending its zero-Covid policy goal is likely to have a “substantial impact” in Australia, Treasurer Jim Chalmers said. In the photo, people using PPE, one of the elements that will be most affected.
In the last financial year to June 30, 2022, Australia imported $103 billion worth of goods and services from China, 23 per cent of total imports of $450 billion.
However, the chief economist at Australian investment firm BetaShares said his analysis found the situation will not turn out as bad as Chalmers fears.
David Bassanese argues that the Chinese imports likely to be affected “represent a relatively small part of our economy” and that supply from other countries is available.
“We are facing different conditions than before in the Covid-19 crisis, with reduced global demand for goods and improved supply capacity in other countries that have already ‘learned to live’ with Covid,” Bassanese said. the aussie.
An earlier analysis by the Productivity Commission found that just 7 per cent of Australia’s imports come from sources where it would be difficult to find good alternatives.
But Bassanese acknowledged that China currently supplies two-thirds of these most vulnerable imports to Australia.
“If applied to the latest trade data, this implies that around 3.5 percent of the value of total imports could be considered vulnerable if there are disruptions to Chinese supply, which is around 0.7 percent of GDP,” said.
Australia relies on Chinese imports for much of its mining machinery. In the photo, a picture of coal mining equipment.
The list of vulnerable items includes drilling and transport equipment for the mining sector and computers.
The Productivity Commission said disruptions in the supply of such goods were unlikely to cause serious losses in the short term because Australia has a stock of existing machinery, such as trucks, along with the ability to repair or buy them on the second-hand market. .
Bassanese said other potentially critical areas that could be affected include chemicals for treating water and producing certain pharmaceuticals and PPE.
But he said Australia is generally less at risk of a slowdown in production in China than in the past.
“With more of the rest of the world out of lockdown, sourcing supplies from alternative countries if needed should be easier,” Bassanese said.
There could also be shortages of non-critical Chinese imports, such as swimwear and toys, in the coming months.
Treasurer Jim Chalmers (pictured) said the Covid spillover effect on China was one of the “key risks” to the economy in 2023, due to Australia’s reliance on its markets and workforce.