As China’s growth slows, some of the big commodity exporters around the world face falling prices for exports. Australia in particular is locked into the Chinese market—and the Chinese market, which propelled Australia to steady growth through the worst of the global financial crisis, is now slowing down. The WSJ reports on how reduced demand for iron ore in China could squeeze Australia:
No commodity has been as China-dependent as iron ore, and for good reason: China makes half of the world’s steel, and 98% of iron ore goes into steel production. China imports two-thirds of the 1.2 billion tons of iron ore traded annually on seaborne markets. […]Australia, the world’s top iron-ore exporter, sends 80% of its iron ore—worth $67 billion last year—to China, and Brazil sends half its production of the mineral there. […]In recent years, mining companies in those countries have ramped up production, employment and investment in railroads and ports anticipating that China’s steel industry would increase production and need more iron ore.Instead, during the first eight months of the year, Chinese steel consumption fell 0.3% to 500 million tons—the first such decline in 14 years.
This does not mean that Australia is doomed. Australia is a thoroughly modern country with a strong mixed economy that can weather the storm. But it is good news for Yankee tourists, because it means that the Australian dollar has fallen out of the stratosphere to a more reasonable $.84 U.S. With U.S. interest rates expected to rise and the commodity slump likely to continue, that number could slide further.Our recommendation: if a visit to Australia isn’t on your bucket list, it ought to be. It’s full of friendly people who speak English (more or less), beautiful cities, incredible natural wonders and amazing animals, some of which aren’t lethally poisonous. It’s a long way to travel, but watching your kids laugh in delight as they hand-feed kangaroos and cuddle koalas is something you won’t soon forget.