Rapid urbanisation in China is expected to continue to drive the demand for Australian iron ore exports for decades to come.

‘‘In 2010, China constructed more residential floor space than the entire dwelling stock in Australia,’’ Reserve Bank researchers say. ‘‘This high level of construction follows two decades of strong growth, during which the amount of annual floor space completed more than doubled.

‘‘As a consequence, China’s increased appetite for raw materials has resulted in a significant increase in Australian commodity exports, especially for iron ore and coking coal.’’

Leon Berkelmans and Hao Wang from the RBA’s economics group said China’s urban population is expected to increase by 42 per cent over the next two decades to about 70 per cent of the total population by 2030.

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By comparison, 90 per cent of Australia’s population already lives in urban areas and the US has an 80 per cent urbanisation rate.

The central bank researchers acknowledge that activity in Chinese housing won’t be as fast as the break-neck pace of previous decades but will still be strong.

‘‘The level of urban residential construction is expected to peak by the end of this decade at a level that is about 12 per cent higher than in 2011,’’ the RBA report said.

The RBA research said increased car ownership in China would also raise demand for steel and consequently Australian iron ore exports.

They’re not just talking about the steel used in cars, it’s the increasing amount of steel needed in more modern buildings, a term called ‘‘steel intensity’’, the research said.

‘‘A sizeable increase in automobile ownership in the coming years is likely to stimulate demand for buildings with underground car parking, which also requires more steel to be used per square metre of living space.

‘‘For these reasons, even though growth in residential construction is likely to decline over the coming decades, the growth of steel demand is not likely to decline to the same extent.

‘‘Indeed, average steel intensity has increased steadily over the past 30 years.’’

Source: AAP