[AndrewWoo]

Australia’s Chinese-speaking Prime Minister, Kevin Rudd, has been notably vocal in recent weeks arguing that the economy has managed to dodge a technical recession thus far, is the fastest growing country among the OECD advanced nations, and boasts the second lowest unemployment rate. His Treasurer blew a similar trumpet and added in his address to the Australian National University this week that China is of “particular importance” to the Australian economy and that he is optimistic about the region. While there is no doubt that the RBA’s aggressive 425bp of easing to date coupled with a large 2½% of GDP in fiscal stimulus in CY2009 is tempering the depth and duration of this downturn, the Chinese lifeboat is also lending some much needed support. In annual terms, the comprehensive Department of Foreign Affairs and Trade’s data confirmed that Japan remained Australia’s largest export market in 2008, followed by China. However, the more timely monthly merchandise trade numbers suggest that China has overtaken Japan as the key export destination thus far in 2009. Amid signs of considerable fiscal policy traction in China fuelling renewed appetite for commodities as well as evidence of stock piling to take advantage of lower commodity prices, resource rich Australia has been a key beneficiary.

Regardless of the ebbs and flows of the monthly data, China remains the key growth market for Australia’s exports, taking around 20% of merchandise exports, a five fold increase in barely a decade. Iron ore dominates Australia’s exports to China followed by wool, other ores, copper, and coal.