OECD warns Australia that China tensions may hurt export sector, hamper economic growth

Australia has been warned that a further escalation in its tensions with China could undermine its economic growth outlook.

In its latest Economic Outlook, the Organisation for Economic Cooperation and Development (OECD) urges Australia not to withdraw its fiscal and monetary policy support until the economic recovery is “well-entrenched”.

It expects the unwinding of strong fiscal support will be a headwind for economic growth in the second half of 2021 and the gradual phasing out of job retention programs – such as JobKeeper – will cause the unemployment rate to rise further.

However, the easing of Victoria’s lockdown and strong fiscal support will boost economic growth in the near term.

“The infrastructure-led economic recovery in China will help sustain commodity exports and mining investment,” the OECD said, releasing the outlook on Tuesday.

“(But) any additional escalation in geopolitical tensions with China may undermine export growth.”

The OECD has warned Australia about the economic impact of growing geopolitical tensions with China. Credit: AAP

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