Australia Says It Doesn’t Need to Choose Between U.S. and China

(Bloomberg) -- Australia’s top economic official said the country doesn’t need to choose between the U.S. and China, despite growing signs of polarization between the world’s largest economies.

Treasurer Josh Frydenberg told Bloomberg Television Friday that it was possible to navigate a path that maintained strong ties with the U.S., the largest investor in Australia, and China, the country’s biggest trading partner. At the same time, he acknowledged that international trade was stalling because of the increasing frictions between the two nations.

“There’s no doubt that the escalating trade tensions have weighed on the global economic outlook,” Frydenberg said in an interview in Fukuoka, Japan. “But what we are confident of is that both China and the U.S. will continue to be strong economic partners for Australia.”

Frydenberg is attending the Group of 20 gathering of finance and central banking chiefs as risks from the U.S.-China trade war and a turn in monetary policy top the agenda. The two superpowers are blaming each other for wrecking recent trade talks amid a darkening outlook for the world economy, with their failure to agree a deal leading Citigroup Inc. and Morgan Stanley to warn that the dispute risks tipping the world into recession.

Trump-Xi Meeting

Presidents Donald Trump and Xi Jinping are scheduled to meet at the G-20 summit in Osaka in late June, as the world watches to see if the event paves the way for breaking the current trade talk deadlock.

“We’ll continue to maintain a positive, mutually-beneficial relationship with China as well as maintaining our alliance with the U.S.,” Frydenberg said.

The treasurer spoke three days after the Reserve Bank of Australia cut its cash rate to a new record low as it tries to revive a sputtering economy and reignite dormant inflation. RBA Governor Philip Lowe, in a speech following the decision, urged the government to take a more active role in pursuing structural reforms to support future economic growth.

As well as providing more cash to households with mortgages, Lowe expects the RBA’s easing to exert some downward pressure on the Australian dollar and help simulate the economy.

Frydenberg echoed that view: “Obviously, the lower the dollar the better it is for our exporters.” However, he gave little sign of bold new policy plans to boost growth outside of the government’s tax-cut program and a decade-long infrastructure plan. Government spending is currently the main support for the economy, which slowed to a 10-year low in the first quarter.

Huawei Dilemma

China’s importance to Australia has grown exponentially as it buys up iron ore for its massive infrastructure investments, sends students to universities Down Under as well as increasing numbers of tourists. Yet Australia also has an exceptionally close security alliance with the U.S., having fought alongside America in almost every 20th century war.

Australia last year banned Huawei Technologies Co. from bidding for 5G contracts, citing security concerns and the introduction of anti-foreign interference laws aimed at Beijing, souring the relationship. The Trump administration, meantime, has engaged in a combative global campaign for months to keep Huawei products out of future 5G broadband networks.

“We take our decisions based on our national interest,” Frydenberg said, in response to a question on the risk that China might choose to retaliate economically over the Huawei decision. “But we continue to work very closely and effectively with China.”

To contact the reporters on this story: Michael Heath in Sydney at mheath1@bloomberg.net;Kathleen Hays in New York at khays4@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke

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