Western Australia’s trade and economic relationship with China

The Bankwest Curtin Economics Centre was approached by the Australia China Business Council (ACBC) to evaluate the benefits of Western Australia’s trade, export and investment activity with China to the State’s households.

China is the second largest economy in the world and is Australia’s largest trading partner. Given that Western Australia accounts for some 44 per cent of Australian exports, the China-WA economic relationship is an important one for the Australian nation. In 2021 China accounted for 60 per cent of the state’s total exports and 19 per cent of the state’s total imports.

With such strong economic ties and with diplomatic tensions between Australia and China, it is more important now than ever before to understand the benefits of China-WA trade to Western Australian households.

Applying rigorous economic modelling, this report estimates that WA’s trade intensity with China increased household disposable income to the region of $7,900 in 2020-21. This equates to 5.5 per cent of household disposable income per capita and $8.4 billion on aggregate for WA households.

In terms of labour market effects, 2020-21 levels of trade with China are estimated to have contributed 244,000 jobs, and led to a 1 percentage point reduction in unemployment rates in Western Australia.

WA’s relationship with China is also found to reduce the cost of living for the state’s households. The total cost of WA’s imports would increase by around $3.9 billion (10.4 per cent) above the current $37.5 billion if Chinese imports were to be sourced from countries other than China.

And taking account of the share of imports that go towards final consumption, WA households would pay 3.4 per cent more for the same consumption items without China as a major import partner.