Treasurer Jim Chalmers says China stimulus moves ‘really welcome’

Treasurer Jim Chalmers says a major move by China could be a game changer for a key sector of Australia’s economy.

Federal Treasurer Jim Chalmers has welcomed major moves by China to stimulate its struggling economy, saying it could signal some much-needed relief to a key sector of Australia’s economy.

The price of iron ore has tumbled over the past year on the back of slowing steel demand in China, with fresh projections pointing to a $39bn plunge by the 2025-26 fiscal year.

But Mr Chalmers said Beijing’s decisions to cut interest rates and free up cash through mortgage refinancing measures could help bring iron prices back up.

“This is a really welcome development for Australia, that the authorities are stepping in to support growth and activity in the Chinese economy,” he told reporters on Monday.

Federal Treasurer Jim Chalmers says moves by China to stimulate its economy could be the key to bringing iron ore prices back up. Picture: NewsWire / Martin Ollman

“It has been a considerable concern ... for the government over a period of time now that weakness in the Chinese economy.

“You can see the way that markets have reacted to it, you can see the way that the iron ore price has reacted.”

Global markets reacted positively, with iron ore prices jumping.

China’s steel industry has slowed due to its struggling construction and real estate sectors, which make up about two thirds of the country’s total economic activity.

By offering refinance options, Beijing hopes a greater liquidity will result in more property purchases.

Mr Chalmers, who was in Beijing last week for high level economic talks, said the global responses showed “that people were really hanging out for some additional steps from the Chinese government.”

But the treasurer also warned against “over-assuming its impact” on Commonwealth coffers in the short term.

“The iron ore price has been pretty low in historical terms,” he said,

“I think it was down about 40 per cent from the beginning of the year to a couple of weeks ago.

“It has been below our assumptions at times, which is another important reminder of why we need to be conservative about our assumptions.”

While iron ore volumes are tipped to grow to 930 million tonnes by 2025-26, earnings from its exports are forecast to fall from $138bn in 2023-24 to $107bn this financial year, and then down further to $99bn in 2025-26, according to the Department of Resources.