According to JPMorgan, a full recovery in Australia’s tourism will add 0.5 percentage points to its GDP, and returning international students from China will add another 0.4 percentage points.
James D Morgan | Getty Images Entertainment | Getty Images
According to JPMorgan, the Australian economy could be no small beneficiary of an end to China’s zero-Covid policy over the next two years.
“China’s transition to an earlier reopening raises questions about the potential impact on the Australian economy,” said Tom Kennedy, JPMorgan’s chief investment strategist, in a report on Saturday.
“The biggest potential benefit from reopening is in the service sector, as China is the largest consumer of Australia’s tourism and education exports,” Kennedy wrote, noting that benefits from further changes in Beijing’s industrial policy would be exceptional.
The company’s note added that a full recovery in Australia’s tourism will boost gross domestic product by 0.5 percentage points and the return of international students from China by another 0.4 percentage points — almost a full percentage point of the country’s economic growth.
Full recovery of tourism with China
Despite Australia lifting Covid-related travel restrictions in July last year, its short-term arrivals from overseas are still a far cry from pre-pandemic levels.
The latest data from the Australia Bureau of Statistics shows a total of 430,470 short-term trips to Australia were made in October 2022 – down 44% from the same month in 2019, when the nation received more than 1 million short-term visitors.
Tourists at Mrs Macquarie’s Chair on January 29, 2020 in Sydney, Australia. In 2019, China accounted for 15.3% of all Australian inbound tourism, making it the largest source of short-term visitors, JPMorgan said.
Jenny Evans | News from Getty Images | Getty Images
October data released in December showed that visitors came mainly from New Zealand, the UK and the US – arrivals from China were not included in the ABS top 10 list of countries from which tourists came.
In 2019, China accounted for 15.3% of all Australian inbound tourism, making it the largest source of short-term visitors, JPMorgan said. It added that the average Chinese tourist spends four times that of a tourist from New Zealand, the second largest source of tourists after Australia.
“Our expectation is that the tourism-driven consumption impulse will extend into 2023 and 2024,” Kennedy wrote.
“While the maturity-adjusted spending figures are less conspicuous, real GDP is an aggregate concept and so the lack of Chinese tourism has been a notable headwind,” he said.
students from China
JPMorgan said it expects the pace of international student enrollments to accelerate this year.
More than 253,000 international students arrived from China from January to October 2019, according to the Australian Department of Education. That year-to-date number dropped to about 173,000 in October 2022.
The latest data showed that students from China accounted for 26% of all enrollments – the largest proportion from any single country.
“If education exports to China return to 2019 levels, the real GDP boost would be 0.4 percentage point, a useful boost in an environment of slowing household consumption but not a panacea to avoid a slowdown in growth,” Kennedy wrote.
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