RBA Sentiment: Australia as a Proxy for China

Abstract

This book, so far, has covered the Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan. The economies these banks preside over all fall within the top five worldwide and, consequently, their significance to the global market is obvious. Sitting at 13th, the Australian economy has pull, but it still lags far behind the production power of the European Union, the United States, the United Kingdom, and Japan (Economy Watch 2010). With this in mind, at least one question immediately arises: why examine the Reserve Bank of Australia (RBA) alongside these other central banks when seven other, larger economies stand in line between Australia and this group? The answer lies in Australia’s close ties to a market that shares the thin air occupied by that cadre of heavy-hitters: China. Beginning with a short history of the RBA, this chapter explores the relationship between the Australian and Chinese economies, highlighting how a close examination of RBA communications could provide valuable insight into two of the most powerful economies in the world.