A Bamboo Curtain: The Grim Australian Consequences of China Conflict

Abstract

The Australian economy has benefited from several decades of extraordinary Chinese expansion. Slowing growth has diminished these gains and geopolitics between China and western democracies has seen restricted commerce between China and Australia. We use a global economic model to assess the consequences were these tensions to restrict all associated commerce, yielding an Australian real GDP contraction of 6 per cent. A ‘bamboo curtain’, restricting all commerce between western democracies and all other regions, would see massive global losses, with Australia's economic welfare impaired most, while some short‐run relief could stem from small‐country monetary ‘free riding’.