China keeps Australian economy going
- By Geoffrey Murray
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China.org.cn, January 24, 2012
Visiting Australia for the first time in a decade, what strikes me most is the vital role China plays in shielding the land 'down under' from much of the economic crisis afflicting Europe and elsewhere.
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Indeed, in an upbeat New Year assessment of the country's economic prospects in 2012, Treasurer (Finance Minister) Wayne Swan expressed confidence that China would take "whatever steps are necessary" to maintain its own rapid growth and that, along with some improvement in American prospects, would keep Australia out of trouble.
China had "plenty of policy firepower to respond if they're adversely affected by Europe…. but every piece of analysis I get gives me confidence they will continue to manage whatever domestic challenges they have in a prudent way," he declared.
In the past, Australia was known as the 'Lucky Country', and, although it has not been immune from economic downturns in more recent times, the fact is that a country ranking only 52nd in the world in terms of population now has the 13th largest economy.
A good part of this is due to abundant agricultural and mineral resources much in demand elsewhere. In the 1970's and 1980's, Japanese demand kept the Australian economy buoyant. Now, that role has been taken over by China.
Far removed from all the nonsense going in Europe, and with their eyes firmly fixed on close cooperation with Asian neighbors, Australians enjoy one of the world's lowest rates of government debt; in fact, this year, net debt is forecast to go no higher than 8.9 per cent of GDP. That's financial rectitude in anyone's book and all three international credit-rating agencies recognize this with a solid AAA.
In the mining sector, things have not been this crazy since the gold rush of the 1850's. If you want to see a genuine boomtown in operation, go is Port Hedland, a gritty place of some 20,000 souls in a remote desert area of Western Australia, where nondescript three-bedroom bungalows are selling for a million Australian dollars. It sounds crazy but it reflects the massive growth in the local mining industry to keep China's industrial machine turning smoothly.
I recall a few years ago the respected British weekly magazine The Economist began its analysis of the trade phenomenon by declaring: 'Having trouble finding a taxi or getting served in a Perth restaurant? Blame China!' The point it was making was that many of the taxi drivers and waiters had abandoned the bright lights of the city for high wages in the desert.
If you think that sounds a bit fanciful, then consider a report I spotted in a newspaper just the other day: Australia has launched a recruitment program to fill vacancies in its military forces that are struggling to compete with the mining sector for highly skilled workers, especially when they can earn well over A$100,000 a year.
With military retrenchment biting deep in countries like Britain, many former engineering or electronic specialists for example, are heading for Australia where recruiters from the mines are waiting with open arms - and open checkbooks.
And that brings us back to Port Hedland, the coastal exit for the iron ore (a staggering 700,000 tonnes a day), copper and other resources gouged out of the desert interior.
In 2011, over two-thirds of the mineral exports passing through the port were destined for China, up from 45 percent in 2005. Even though its handling capacity had tripled in the past decade, the port still struggles to cope with a demand expected to double again by 2016. Graphs showing the exponential growth tend to be almost vertical and run off the page.
It isn't just Port Hedland that prospers on from China's high profile buying - the entire national economy has benefited immensely.
Chinese demand, in fact, is credited with ensuring that Australia was among the lucky few countries that managed to avoid a recession in the previous international financial crisis in 2008, and this seems to be one of the reasons Wayne Swan is so confident that his country will ride out what is expected to be a rough 2012.
The dependence on China is likely to triple by the end of the present decade. IMF predictions believe trade with China will then account for around 35 percent of Australia's GDP growth, compared to 12 percent in the last 10 years.
However, there could be a downside to this. Australia is considering making a complaint to the WTO that its companies face increasing demands to buy Chinese-made equipment and services if they want to avoid being locked out of the mainland minerals market. Unions are getting agitated that this might cost domestic jobs in the long run.
As a result, while enjoying the wealth pouring into their economy from China, Australians are beginning to wonder if it's not becoming 'too much of a good thing' and creating new economic vulnerabilities.
The author is a columnist with China.org.cn. For more information please visit: http://m.keyanhelp.cn/opinion/geoffreymurray.htm
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
