The FT has published a full length article which looks at the dilemma facing the Australian economy now that the mining boom and China’s previously ferocious appettite seem to be on the wane.
For 23 consecutive years, the country was the only developed state in the world to avoid recession. Driven by China’s rapacious demand for coal,Iron ore and liquefied natural gas, companies committed to investing A$394bn between 2003-2012, says the Australian Bureau of Resources and Energy Economics. This investment boom helped Australia to escape the worst of the global financial crisis and boosted average incomes to a level 25 per cent above those in the US. For a time the Australian dollar was more valuable than the US greenback.
But as investment from resource projects dries up and concerns about the Chinese economy have caused a sharp fall in the price of Australia’s key exports, iron ore and coal, observers warn a correction is coming. In February unemployment briefly touched 6 per cent – the highest in a decade. The ruling Liberal-National coalition, which was elected in September, is warning that fast-rising government spending has created a “budget emergency” which threatens Australia’s hard-won prosperity.
Last month Prime Minister Tony Abbott unveiled the toughest Australian budget in almost 20 years, which proposes slashing planned spending on welfare, health and education, and raising income taxes for high earners.But Mr Abbott faces resistance this month from opposition parties, which hold the balance of power in the upper house of parliament. Many young Australians, who have no experience of tough economic times, oppose the spending cuts, which have sparked a spate of student protests
Definitely worth a read at the FT here . May be gated but available on free subscription or search “Australia – End of the boom”
