China plays big part in Aussie recovery

A new raft of upbeat economic numbers out of China suggests Australia's recovery
story would be a totally different tale without the needs of the Asian giant.
The latest round of figures from China's National Bureau of Statistics released on
Friday shows industrial production is growing at its fastest pace in a year, retail
sales growth accelerating to the best levels in 2009 and investment at its highest
level in nearly five years.
"Australian resource producers have every reason to celebrate the strength of the
Chinese economic recovery," Commonwealth Securities economist Savanth Sebastian
said.
"Without China it would be a very different world - not just for Australian miners
but for our economy as a whole."
China's industrial output expanded at an annual pace of 12.3 per cent in August, up
from 10.8 per cent in the year to July, while retail sales rose to 15.4 per cent in
the 12 months to August from 15.2 per cent in the year to July.
The country's urban investment, such as spending on roads and power plants, grew at
a massive 33 per cent annual pace in the first eight months of the year, just short
of the fastest growth pace in five years.
Mr Sebastian said such growth in investment has supported commodity prices across
the globe over the past few months.
"The data from January to August has laid a good foundation for realising the eight
per cent economic growth target for the full year," National Bureau of Statistics
spokesman Li Xiaochao told a press conference in Beijing.
Last year China unveiled a four-trillion-yuan ($A6.8 billion) stimulus package aimed
at boosting domestic demand as exports plunged and economic growth slowed.
On Thursday, Premier Wen Jiabao said China's recovery momentum was "not yet stable"
and that it was too soon to back away from the stimulus policies.
The Australian government is putting forward a similar argument to maintain its
stimulus spending in the face of intense pressure from the opposition to end it.
Small Business Minister Craig Emerson told reporters in Canberra on Friday that
domestic data released this week has been a "reality check" on the economic
recovery.
He said while last week's national accounts showing 0.6 per cent gross domestic
product growth in the June quarter was "encouraging", this week's retail sales and
employment data both contracted.
Growth in retail spending fell for a second consecutive month in July, while
full-time jobs plunged by nearly 31,000 in August.
"This proves a reality check on how far we are on the road to recovery. It shows we
have a long way to go," Dr Emerson said.
"And yet the opposition persists with its irresponsible argument that the government
should withdraw the stimulus prematurely. To withdraw the stimulus prematurely now
would create a lot more unemployment and throw a lot of small businesses out of
operation."
Still, sombre readings on spending and jobs does mean that the Reserve Bank of
Australia (RBA) will hold fire on raising the official cash rate for now.
"(There) is certainly enough for the RBA to wait another month before moving and no
reason to shift us from our current view that the first rate hike will be delayed
until February," Westpac chief economist Bill Evans said.