Reserve Bank of Australia deputy governor Ric Battellino said Australia was now more tied to the fortunes of China than the United States and Europe, and the outlook for the Asian giant remained strong.
China has maintained strong growth in the face of the US recession and the sluggish recovery, he said. The latest batch of Chinese data, which relates to August, suggests that any slowing in the economy has, to date, been modest.
China is Australia's single biggest export market, taking around 26 per cent of its exports, compared to just 4 per cent for the United States and 7 per cent for Europe.
Chinese demand for Australian commodities has lifted its terms of trade to record highs and is funding a massive boom in mining investment.
The Australian dollar briefly slipped below parity with the greenback today after the US Federal Reserve warned on the American economy and more signs of a slowdown in China.
The dollar fell as low as 99.94 US cents shortly after midday, but soon after dipping below the dollar-for-dollar mark the local unit recovered slightly and closed locally at $US1.0017.
Most of the day's loss was recorded in overnight trade, when the Aussie fell 2.5 cents, from $US1.028.
Mr Battellino said there was a risk that turmoil in global markets could undermine household and business confidence, and dampen spending.
Mr Battellino also played down the recent softness in employment, which had seen the jobless rate rise 0.4 percentage points in the past few months to reach 5.3 per cent in August.
There are some aspects of labour market numbers that have a stronger feel, he said, pointing to solid growth in hours worked and a steady trend in the number of people claiming unemployment benefit. All this suggests more information is needed before we can draw any firm conclusions about whether or not the labor market is weakening.
Likewise, while surveys of consumer and business confidence had shown weakness, it was too early to know if that would crimp spending.
So far, recent liaison information from retailers does not point to any further significant weakening, said Mr Battellino.
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Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com