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  • Writer's pictureCrest Economics

What China reopening means for the Australian economy – Jan 2023

China’s reopening brings a glimmer of economic positivity amid sluggish forward outlooks in Australia. Forever the bastion of Australia’s export strength, open borders will provide a wave of injection into tourism and education sectors, both of which faced the full force of pandemic-era lockdowns.

Despite Australia opening as early as February 2022, its largest two way trading partner remained in strict lockdown. Chinese arrivals to Australia fell by more than 95% from as high as 1.43 million visitors in 2019. This reopening is expected to place a positive bearing on growth outlooks, with student and tourist arrivals predicted to provide an additional one percentage point to the growth outlook, along with improving the external accounts. Nonetheless, it remains a slow return to normal for both sides.

For instance, airfare prices have increased by a magnitude of 800%, deterring much travel outside of essential. Airlines have yet to resume traditional flight routes in and out of China, with little government action on both sides facilitating this process. The latter is likely in response to transmission risks associated with rapidly embracing inbound Chinese visitors. As a result, the tourism engine has been noticeably stagnant, but is expected to ramp up in coming months as regulations and procedures adapt to meet a resurgence in demand.

Domestically, businesses need to react dynamically to these changes in order to effectively respond to the tourism inflow. Travel companies need to innovate to create new product offerings for customers, while hotels and attractions will need to adapt to accomodate for larger numbers. With international students coming back as well, China’s reopening will certainly reopen a vital growth channel for the Australian economy.

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