I have no particular insights (that may be obvious
) but wouldn't the 25+% in value of Chinese imports be largely due to fall in iron ore and maybe coal price (ie as opposed to volume)? Volumes have certainly fallen, but if the difference is largely price, and volumes are not too much off, then Australian employment etc is less impacted. They are still digging the stuff up, so rail, ports etc still working, and employing.
Right in theory but broke in practice.
Numerous coal mines as well as some iron ore mines have been totally shut down, mothballed or slashed production down to close to care & maintenance levels. If you look at the rail statistics the volumes have fallen and the equity of a number of companies no longer exists and they are reliant on their creditors to continue.
BHP, Rio and Fortescue are cutting workers whilst increasing volumes produced due to efficiency gains. For example the driverless trucks carrying the ore up from the pits - not only cuts drivers but also maintenance as the computer is more efficient a driver and causes less wear & tear.
Definitely a hit to company profits, and Mr Hockey's tax take (and Barnett's royalties!!).
A recession is underway in the mining sector - very similar to what happened from 1985 to 1991. An Australian Recession 'officially' occurs when you have two quarters of -ve GDP growth. <<
Economists/Politicians DO NOT like saying the word contraction, much prefer negative growth >>
GDP is calculated in different ways. The most commonly discussed version has Net Exports in it. If we export the same $$ value and import the same $$ value in two consecutive years then GDP has actually fallen (due to GDP inflation aka deflator). So if Aust still had record exports and no change in imports then net Exports will have fallen (= be negative).
Now the figures Y-t-d have fallen by nearly 26%, adjust for deflator and it is closer to 28%. That is a BIG negative number, using the Guardian's calculator that suggests the fall in Exports, if it stays at this level for the rest of the year, will subtract 3% from Australian GDP. That is just from part of one component - the export side.
Net Exports = Exports - Imports.
Then have a look at the Import side and that is also bad news. Currently, on average, for every extra dollar spent in Australia about 87% of that is imported. In some categories (like furniture) it is closer to 96%. Clothing is also around 97% (last time I ran the numbers).
Then add in the interest on the ever expanding Australian Debt (both Govt and Private) held by overseas and that is also a -ve to GDP.
ALL-in-all the circumstances now are not that different to what prompted the "
Banana republic" statement by Paul Keating - in many ways they are worse. Big ticket items are more imported than they were then. Just think about car production, steel production, oil production, aluminum etc. Worse still we export LNG at a fraction of the current world price whilst paying world price for the oil imports. Also Q's announcement of the B787s means around a $2-3bn increase in imports as well.
If the Chinese just stopped buying, then local mining and related operations would be hit huge, as well as companies' revenues.
China has stopped buying of sorts. They have bought into many resource operations directly and are trying to eliminate the benefit to Australia of exporting resources to China (see current Chinese 5 yr plan - 'benefit from growth in China from all sources' = earn the profits in sending goods to China).
China has stopped buying certain commodities repeatedly over the last 7 years and driven many companies out of business world-wide. Or the Chinese Govt has provided 'efficiency' initiatives to say the rare earth miners in China (Govt manipulation of international supply demand) which saw all but one rare earth miner globally forced out of business - including several in Australia.
Then once they had this stranglehold they announced China would not export the commodities but require overseas companies set up their plant in China or miss out. The biggest threat by China was about two years back.
Still could generate a recession, though.
Have a look at FIFO operations in Australia - that industry is in recession in addition to mining, also mining services industry, mining supplies industry. The bubble has truly burst for mining town housing HOWEVER the banks do not appear to have foreclosed on a single property. Not just Australia but worldwide. Have a look at Halliburton's price for example, fallen from around USD74 to USD38.
I'm involved in the Canadian gas sector - fascinating there how the glut of shale gas in Nth America has kept the gas prices low and caused the US to be net self sufficient in energy (I think that's true - that's what they are saying). Completely unexpected as of a few years ago and gives the US additional leverage against the gulf states too (although the present incumbent seems reluctant to crystallise that leverage).
Edit: That last bit is a change-of-subject; not linking it to China-Australia trade!
That's what the OT thread is all about!
The cost of shipping oil shows just how widespread the downturn really is.
) but now they are going hell-for-leather, with the strong support of the Harper administration. Obama's opposition to the keystone XL has been taken in Canada as a very unfriendly act (or at least in the west of the country).
