In the wake of the announcement, which follows a decade of negotiations between the countries, Smith said the deal would be a major boost for Australia’s future prosperity given its close links with the growing Chinese economy.
"Many sectors of Australia’s domestic economy... will now have access to new opportunities and new sources of foreign investment creating confidence to make longer-term investments."
“Many sectors of Australia’s domestic economy – in particular natural resources, agriculture and services – will now have access to new opportunities and new sources of foreign investment creating confidence to make longer-term investments given the enhanced export opportunities,” he said.
“The growing Chinese middle class is the major driver behind our estimates that Australia could gain an additional $710 billion in agricultural exports by 2050 and our farmers are set to benefit in a similar way to how New Zealand benefited from its 2008 FTA with China.”
Under the deal, 85 per cent of all Australian exports will enter China tariff-free immediately. This will expand to 93 per cent within four years and 95 per cent after a decade. For China, it means that 95 per cent of all goods imported by Australia will be tariff free after just four years.
“Like all FTAs, there will be individual ‘winners’ and ‘losers’,” ANZ Research said. “Overall, however, sizeable gains should accrue to the economies of both China and Australia.”
The bulk of the FTA rests on the four pillars of agriculture, services, resources and investment.
Tariffs on a range of agricultural and horticultural exports from Australia will be slowly be phased out, although a decision on access for soft Australian commodities including rice, sugar and cotton has been deferred.
Australia will be granted increased access to Chinese services in around 40 areas. This will elevate Australian business to levels at an equivalent or better than nations with similar deals.
In resources, China will reduce or remove recently implemented tariffs on Australian coal exports. Significantly, tariffs on coking coal will be cut to zero.
Private Chinese investment in Australia below $1.08 billion will no longer require approval from the Foreign Investment Review Board. State-owned groups will need approval for at least the next three years.
“In our view, the economic content of the FTA finally agreed upon is much richer than what we see on the surface,” ANZ Research says.
“Given that China and Australia have already established close trade and investment ties over the past decade and much of the economic benefits have been realised already, this FTA will still provide a platform for deepening and broadening the economic relationship further."
Separately, China and Australia are expected to announce a locally based RMB clearing facility in a move that will strengthen bilateral financial flows between the countries.
According to ANZ research, if 30 per cent of bilateral trade between the nations is to be settled in RMB by 2020, it will represent payment flows of $US48 billion (RMB300 billion) a year.
“Furthermore, other capital flows such as FDI from Chinese enterprises, securities investments, immigration and other form of remittance may also be denominated and settled in RMB,” ANZ research said. “All these provide a foundation to build Australia’s RMB business.”