But we cannot be sure that this modest sensitivity will persist in the face of strong labor market conditions, given that we do not fully understand how it came to be so modest in the first place. Although the evidence is weak that inflation responds in a nonlinear manner to resource utilization, this risk is one that we cannot entirely dismiss.
It is a large producer of food, energy, basic materials and education and tourism services – products and services for which China has a very strong demand – while the limited size and specialised nature of Australia’s manufacturing sector mean that the economy as a whole is not facing wide-scale competitive pressures from China.