Emerging Asia’s Impact on Australian Growth: Some Insights From GEM

IMF Working Papers, November 1, 2010

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Over the last decade, GDP growth in emerging Asia was roughly twice as fast as average world growth.
The IMF’s Global Economy Model (GEM) is used to estimate the impact that emerging Asia’s growth differential has had on Australia.
The simulation analysis, which replicates some key features from the last decade, suggests that roughly 25 percent of Australia's growth over the last decade has been from emerging Asia’s growth differential over that period.
Looking ahead, the analysis suggests that should emerging Asia continue to grow in a similar fashion, Australia’s growth dividend could almost double.
If growth in emerging Asia remained strong, but became more balanced across the tradable and nontradable goods sectors then Australia’s growth dividend would be slightly lower than the estimate for the last decade.

Historical-replication scenario:
- Assumes emerging Asia’s growth differential over the past decade.
- Outcome: roughly 25 percent of Australia’s growth over the last decade attributable to emerging Asia’s growth differential.
Continued-pattern scenario:
- Assumes emerging Asia continues to grow in a similar fashion going forward.
- Outcome: Australia’s growth dividend could almost double relative to the last-decade estimate.
Sectoral-rebalancing scenario:
- Assumes emerging Asia’s growth remains strong but becomes more balanced across tradable and nontradable goods sectors.
- Outcome: Australia’s growth dividend would be slightly lower than the estimate for the last decade.