Manufacturing News

Chinese downturn could cost 500k Australian jobs


A downturn in China would have catastrophic implications for Australia’s economy, according to new research from Deloitte.

While there is not an immediate risk of a Chinese downturn, Deloitte partner Chris Richardson believes it is a ‘plausible risk’, considering its elevated debts and reliance on government stimulus spending to maintain growth, not to mention global tensions over trade.

“Compared with the global financial crisis, Australia’s vulnerabilities are higher, our defences are weaker, and this time around China would be a cause of the problem rather than part of the solution,” said Richardson in a pre-released speech for the National Press Club.

According to Deloitte, if China’s growth rate were to slow to less than three per cent this year, Australian employment would decrease by 500,000, house prices would fall by nine per cent (resulting in a $6 trillion loss), and the share market would fall by 17 per cent, costing a further $3 trillion.

More than a third of the jobs lost would be in construction, with mining also taking a significant hit, according to the research firm. Health care would be relatively safe however, and a fall in the Australian dollar would actually help tourism, farming and some sectors of manufacturing, particularly brewing.

Deloitte believes economic output would begin to recover by 2020, however even in 2035 it would still be 2 per cent lower than it should be.

A Chinese downturn could be triggered by a trade war, banking crisis or loss of public confidence due to falling asset prices.

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