The Australian economy has been struggling a bit in the post mining boom environment, but with an FTA with China, Australia's major trading partner, "it just gives me confidence that we'll manage to get good growth going forward," Shane Oliver, chief economist at AMP Capital, said on Wednesday.
The Australian and Chinese governments signed a long-awaited free trade agreement (FTA) in a ceremony in Canberra on Wednesday, freeing up trade between the two countries.
The larger access of Australian businesses into the Chinese market and vice-versa gives Shane Oliver, also head of Investment Strategy at AMP Capital, confidence that Australia's economy will maintain a 3 percent growth rate, which in turn is great for Australian consumers through job creation.
The historic agreement, signed by Australia's Trade Minister Andrew Robb and China's Commerce Minister Gao Hucheng, finalized negotiations that began 10 years ago and followed the Declaration of Intent signed in November by the two countries' leaders, Australian Prime Minister Tony Abbott and Chinese President Xi Jinping.
At the signing ceremony in Canberra, Australian Prime Minister Tony Abbott congratulated the agreement's negotiating teams, saying the deal was globally significant.
"What you have collectively done is history-making for both our countries. It will change our countries for the better. It will change our region for the better. It will change our world for the better," Abbott said.
The China-Australia FTA removes significant trade barriers into China's markets, most notably for Australia's primary producers.
Australian federal Agriculture Minister Barnaby Joyce expects Australia's 9-billion-AU dollar (6.95 billion U.S. dollar) Chinese export market to grow under the China-Australia FTA.
This reflects in the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) prediction that China will account for 43 percent of all growth in worldwide agricultural product demand by 2050.
Westpac Bank's Greater China director, Andrew Whitford, when speaking with Talk to China in May, expects the amount of trade between Australia and China to significantly increase over time from the larger access of Australian companies into the Chinese market.
"You only need to look at the increase in trade that New Zealand was able to achieve when it entered into its free trade agreement in 2008 with China," Whitford said. "In that situation you saw 44 percent year on year increase in growth. So we expect to see a similar sort of increase in the trade flows."
The removal of trade barriers also aids China's investment into Australia.
Under the agreement signed on Wednesday, the screening threshold for private Chinese corporation investment into Australia by the Australian Foreign Investment Review Board (FIRB) has been lifted from 252 million AU dollars (194.5 million U.S. dollars) to more than 1 billion AU dollars, a similar level afforded to Australia's other larger investment partners.
While the economic benefits for China and Australia are significant as each respective economy evolves, Australian consumers see the closer ties as being beneficial to the relationship.
On Tuesday, the 2015 annual Lowy Institute for International Policy -- an Australian foreign policy think tank -- opinion poll said most Australian adults (77 percent) see China as "more of an economic partner to Australia" than a "military threat" (15 percent). An almost equal number (73 percent) say "Australia should develop closer relations with China as it grows in influence."
Sixty-five percent of Australians said free trade agreements are good for Australia's international relationships; however less then half of Australians see free trade agreements are good for Australia's economy.
Lowy Institute Director of International Economics Leon Berkelmens said the hype of the benefits surrounding previous free trade agreements with Australia's economic partners have made Australians skeptical.
However, the latest ACRI survey shows Australians think the China-Australia FTA will bring the most benefits out of all trade agreements signed by Australia previously.
Australia-China Research Institute Deputy Director James Laurenceson says this is not only because Australia is removing tariffs on imported goods from China, which is great for the Australian consumers, the shifting Chinese economy to being more consumer focused economy is almost more important.
"China is going to be demanding more Australian goods and services because it (also is lowering) the trade barriers," Laurenceson said. "It's now cheaper for Chinese consumers to buy Australian products, goods and services compared with before, so Australian workers (that) seek to sell goods and services into china, will find more customers ... meaning more jobs in Australia. "
