China’s economic recovery is a sign that global demand will improve this year, Australian Treasurer Wayne Swan said ahead of a visit to Hong Kong where he will speak today at the Asian Financial Forum.
“I’m optimistic that 2013 will be a better year for the global economy,” Swan said yesterday in his weekly economic note. “One cause of optimism is recent evidence that China’s economy appears to be stabilizing after economic conditions moderated in 2012.”
China’s exports rose more than forecast in December and a broad measure of credit surged 28 percent, adding to signs that the recovery in the world’s second-largest economy is gaining traction. The nation’s new leaders are seeking to sustain a pickup in growth after a seven-quarter slowdown.
Economic growth in China probably accelerated to 7.8 percent in the fourth quarter from a year earlier, up from a three-year low of 7.4 percent in the previous period, according to the median estimate of analysts surveyed by Bloomberg.
“The global economy remains hostage to two familiar downside risks, the fiscal situation in the U.S. and the ongoing sovereign debt crisis in Europe,” Swan said. Still “both sides of the Atlantic have recently made encouraging progress in dealing with these challenges.”
The U.S. reached its debt ceiling Dec. 31 and, without an extension of the spending limit, the Treasury will exhaust measures to finance the government as early as mid-February, according to the Congressional Budget Office. Moody’s Investors Service warned Jan. 2 that further measures to control the deficit were needed to support the nation’s top Aaa rating.
“Uncertainty remaining around their debt ceiling, unresolved spending cuts and the sustainability of their budget in the long term means the U.S. has a lot more work to do to restore confidence,” said Swan. “Anything less than a comprehensive deal which addresses all these issues will have a lasting impact on the global economy with substantial damage having already been done.”
There is also a “burning need” for economic growth and job creation in Europe, he said.
In Hong Kong, Swan will confer with Financial Secretary John Tsang, and meet investors and Australian business leaders. He will promote greater use of China’s currency in international trade and finance before traveling to the U.S.
Australia’s economy received a boost in recent months as the price of iron ore, the nation’s most valuable export, surged to a 15-month high, reflecting expectations of faster growth in China, which buys 74 percent of all ore exports.
Australia is looking for a global recovery to sustain exports and extend 21 recession-free years as a resource investment boom is predicted to peak. It will continue to look to growth in Asia as a means of boosting its economy, Swan said.
“As the economic weight of the world continues to tilt toward Asia, we are in the box seat to take advantage,” he said. “While Australia is in the right place at the right time, we can’t assume a prosperous future will simply happen for us, so we need to put in place the reforms that will ensure our economy remains resilient.”
The government last month said it is unlikely to deliver a pledged budget surplus this fiscal year as weaker growth and a strong local currency curb tax receipts.
Prime Minister Julia Gillard staked her political credibility partly on delivering the surplus, and abandoning the target adds to pressure on her in an election year. Her Labor Party had 32 percent support in a Dec. 10 Newspoll based on a survey before the surplus target was discarded, while Tony Abbott’s Liberal-National opposition attracted 46 percent.
Gillard, Australia’s first woman leader, heads a minority government after winning the closest election in seven decades in 2010, just three months after winning the prime minister’s job in a party coup against predecessor Kevin Rudd. She ended the year under attack over her work as a labor union lawyer 20 years ago, and countered by saying Abbott was trying to smear her reputation, adding to signs of a tough campaign this year.
“Entering 2013, I’ve never felt more ready,” Gillard wrote in a letter published in the Sunday Telegraph yesterday.
The government’s policy priority this year will be “a giant leap forward in education” as well as focusing on support and services to families, national security, implementing the national broadband network for Australian homes and modernizing infrastructure, she said.