Some of the most influential Australian media published stories this week, warning of a potential “slowdown” in China’s economy, which could bring severe economic consequences to Australia.
It began with a widely circulated report by Deloitte Access Economics, that outlined a number of scenarios which were wildly hypothetical regarding China and Australia, and the potential impact should any of them actually occur.
One speculated what would occur as a result of a China slowdown, one covered how Australia would react to successfully navigating the boom in Asia, while the third detailed the potential upside to Australia becoming more “cyber-smart”.
And yet, in the Australian newspaper on Wednesday, rather than cover all three scenarios, the focus of the David Uren article was given purely to the most controversial offering, a China slowdown.
Paragraph after paragraph was devoted to assessing the inner workings of a fictional scenario, ignoring any attempt to analyse the others, in what could best be described as a blatant attempt to sensationalize an issue, but an issue devoid of actual facts.
The writer said the modelling indicated that “house prices (in Australia) would fall by 9 per cent, stripping 600 billion (449.60 billion U.S. dollars) from the wealth of families, while the share market would drop 17 per cent, costing a further 300 billion dollars”, if China’s growth target failed to reach the 6.5 percent growth target this year, and rather, fell to less than 3 percent.
In terms of actual data and analysis, Gerard Burg, Asia economist at the National Australia Bank, said that it was highly unlikely that China wouldn’t reach their growth target, calling it a “very outside possibility”; while Wei Li, Asia director and economist at the Commonwealth Bank of Australia believes China will exceed the growth target set, reaching 6.8 percent in 2017.
“The recent growth momentum is picking up, and especially the recovery in commodity prices and industry profit, will support industry growth and industrial investment going forward,” Li said.
“China’s export growth to the U.S. and the European Union has been strong, and will last for a while, so recovery in the export sector will also enable China to reach their growth target.”
Li also stressed that the slowdown in China’s housing market is much lower than experts anticipated, which adds further emphasis to his, and widespread belief, that the 6.5 percent growth target will be achieved, and possibly exceeded, by China in 2017.
The story in the Australian continued in great detail to highlight the findings of the hypothetical scenario pitched by the Deloitte report and signaled that Australia is potentially at risk, but yet, in a statement, the Deloitte Australia chief executive Cindy Hook was emphatic that the modelling in the report is just a scenario, one of three put forward, without it being indicative of any predictive assessment.
“Taking the time to scan the horizon is among the most valuable investments that businesses, governments and families can make. As business leaders and as a nation, we owe it to ourselves to think through plausible ‘what ifs’ and weigh up what they might mean.” Hook said.
The statement also clearly indicated “none of these three scenarios is the ‘most likely’ outcome for Australia”, while the report when read is is full of “what if” scenarios akin to a science fiction novel about flying cars; and is intended to be taken as merely a possibility, much like any other hypothetical would, and is not intended to be used to stoke fear, or harm investor confidence.
The link between China and Australia’s economies is crucial, and the continued development of strong financial ties are only strained by propagating a flawed message, based on hypothetical modelling rather than data-based analytical assessments, that could potentially damage business confidence between the two nations.
And yet the method of the story in Australia’s only national newspaper continued to outline the myriad of ways in which Australia would be affected by the practically impossible, and highly implausible scenario, and waited until the very last paragraph of a sizeable story to even indicate that this is but one, of which there are other, scenarios floated by the global economics firm.
Furthermore, the Australian Financial Review ran a similar story on Wednesday, in which it led with the hypothetical modelling scenario, citing similar figures and further stated that according to the report, house prices in Sydney are now 30 percent overvalued when compared to national income, and thus, Australia is at risk of any economic downturn in China.
This iteration of the story also waited until the very end to briefly highlight one of the alternate scenarios in which China’s, and Asia’s growth will exceed expectations, delivering 800 billion Australian dollars to Australia’s national income, and 6 percent in gains to overall business investment.
The relationship between China and Australia is based on mutual understanding, and win-win outcomes for both, with fair and balanced interaction, and reporting, paramount to building an even stronger relationship built upon trust and cooperation.
While hypothetical scenarios do serve a purpose, selective appropriation of speculative data without a full assessment of all available context serves only to promote fear, rather than a shared and prosperous future, for both China and Australia.