Bilateral ties between Australia and China have been strained by a suspended death sentence handed to a Chinese-Australian dissident writer
AFP

Australian Treasurer Jim Chalmers has praised China's massive economic stimulus package to boost the latter's failing economy, but warned it will be some time before it starts benefitting Australia's economy.

The fall in demand for steel in China over the last few years saw the prices of Australia's leading resource export -- iron ore -- stumble, with forecasts predicting a staggering $39 billion decline by the 2025-26 fiscal year.

However, Chalmers believes the recent stimulus measures from China, including its decision to cut interest rates and inject liquidity through mortgage refinancing could potentially boost steel demand, leading to an increase in iron ore prices, News.com.au reported.

"This is a really welcome development for Australia, that the authorities are stepping in to support growth and activity in the Chinese economy," he told reporters on Monday. "It has been a considerable concern ... for the government over a period of time now that weakness in the Chinese economy. You can see the way that markets have reacted to it, you can see the way that the iron ore price has reacted."

Chalmers also urged caution, warning that Australia's economic recovery shouldn't be overstated, even as China's stimulus measures, including interest rate cuts and market support, offer a glimmer of hope.

"We need to be careful about over-assuming its impact on (our own) budget in the near term," he told reporters in Canberra upon his return from Beijing, AAP reported.

Chalmers' talks in Beijing also covered growth prospects, policy formulation, and investment policies, with both nations committing to a transparent and efficient investment framework.

Australia-China relations took a turn for the worse in 2017 after the former accused the Asian country of meddling in its domestic politics. The situation hit rock bottom in 2020 when Australia called for a probe into the origins of COVID-19, which prompted China to impose trade sanctions on several Australian imports.

Chalmers' was the first Australian treasurer visit to China in seven years in an effort to ease the longstanding diplomatic tensions.