China boom to last decades

WA will enjoy a China-led resources boom for at least another 20 years with Sino investment to build and grow on the back of Australian iron ore and other minerals, the Reserve Bank has predicted.

Reserve assistant governor Philip Lowe used a speech yesterday on global economic conditions to reveal the central bank is increasingly bullish about the Australian economy and its ties to China.

Dr Lowe said while there may be some ups and downs, China - which is set to overtake Japan as the world's second largest economy - would continue to grow rapidly and ensure strong and increasing demand for Australian resources.

"I am quite optimistic that story has some decades to run and that underlies much of the positives for the Australian economy," he said.

"For the next 20 years, on average, it is going to be a good 20 years for China and for us."

There have been concerns that China's economy, through the use of a massive stimulus package, may be overheating and that this may precipitate a lift in interest rates and a cut in infrastructure investment.

Mr Lowe said while the timing of cutting the stimulus would be difficult, the total impact on Australian resources suppliers should be limited.

"It is plausible to argue that the recent tightening in credit conditions is a favourable development in that it increases the likelihood that the Chinese economy is on a sustainable path," he said.

Reserve governor Glenn Stevens is expected to use his first of two appearances this year before a House of Representatives committee today to talk up Australia's economic performance and outline a general direction for interest rate movements through the coming 12 months.

The Reserve's confidence in the resources sector, and Australia's ties to China, was reflected in the latest NAB quarterly business survey which showed confidence in the last three months of 2009 climbing strongly.

WA has reclaimed its position as the State with the most confident businesses, led by a strong pick-up in the mining and property sectors.

Conditions remain much more muted, although in positive territory, with WA again showing im- provement in a sign that the State economy is recovering much more quickly than other States.