China's economy like Bolt: Swan

Treasurer Wayne Swan will liken the Chinese economy to Jamaican Olympic gold medallist Usain Bolt in a speech on the outlook for the global economy on Friday.

Mr Swan remains optimistic about China, Australia's largest trading partner, after recently visiting and meeting the country's leadership, noting a slowdown in its growth rate reflects a deliberate move to a more sustainable pace as well as weakness in Europe affecting Chinese exports.

He will tell the Financial Services Council and AMP conference in Sydney that Chinese policymakers have got "substantial policy flexibility" to respond and have said this repeatedly in recent weeks.

"When it comes to China's growth rate, we really just need to keep things in perspective," he will say.

China is now 40 per cent larger than in 2008, so its growth rate can be 20 per cent lower - eight per cent versus 10 per cent back then - for it to make the same contribution to global GDP growth, the treasurer says in his prepared speech.

"It's like Usain Bolt easing off a bit at the end of the 100 metres because he's 10 metres in front and has already smashed the world record."

On Europe, he will say that there's no doubt that there is an "emotional commitment" at the heart of the euro.

But he believes monetary union alone is structurally unstable and must be reinforced by the strong foundations of fiscal union, along with banking and political union.

"This is a reform story that will span decades, not months," he will say.

"It requires more political courage among Europe's leaders than they've shown to date - to take difficult decision in the long term."

He will be more hardline on the outlook for the US economy where the so-called 'fiscal cliff' looms early in the new year and threatens to stall its still moderate recovery.

"With the world watching, it is imperative that the US Congress resolve an agreement to support growth in the short term," Mr Swan will say.

Global markets are nervously watching the positioning of hardline elements of the Republican Party for signs that they will block reasonable attempts at compromise.

"Let's be blunt and acknowledge the biggest threat to the world's biggest economy are the cranks and crazies that have taken over the Republican Party."

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