Lucky Still, Thanks To China
Sydney Morning Herald
Friday October 10, 2008
WHEN the late Donald Horne coined "the lucky country" to describe Australia almost 45 years ago, the term stuck as a not very flattering image. This was a country that did not bother much about foresight or imagination, but was happy to get by and weather economic storms through digging stuff out of the ground and shipping it off to other places. Australia, of course, has since done much to change all that. Tough structural economic reforms have helped us to survive downturns elsewhere over the past 15 years. But now, in what the International Monetary Fund calls "the most dangerous financial shock in mature financial markets since the 1930s", it seems the lucky country is having a comeback. And for that, we can thank China.
The Prime Minister, Kevin Rudd, called on his close China connections and expertise to ring Wen Jiabao, China's Premier, on Monday for a chat about the financial turmoils that now look like sending the United States and Europe into recessions. Mr Rudd wanted to know if China's strong demand for Australia's mineral exports was likely to continue, and thus help save Australia from a similar fate. Mr Wen, he says, assured him it would. Recent drops in steel production notwithstanding, China still expects growth of between 9 per cent and 10 per cent next year. The rich world will struggle to reach one-tenth of that rate. China, Mr Rudd concludes, is now "critical" for Australia's economy remaining robust. Reverting to our old lucky country mentality in 2008, we can only hope both leaders are right.The Pilbara region of Western Australia will be pivotal. China imports from there about 40 per cent of the iron ore for the steel mills that are forging its modernisation. BHP Billiton, Rio Tinto and Fortescue Metals, the three Pilbara mining companies, are pouring billions of dollars into expanding mines, railways and ports to keep up. Much is at stake for them, as well as for Australia as a whole.Despite market scepticism about the commodities boom's future, though, the IMF itself backs up China's own view. Jorg Decressin, a co-author of the IMF's latest world economic outlook report, told ABC radio on Wednesday that Australia was well placed to avoid recession next year, partly because we export commodities at high prices. "We don't see a collapse of those markets," he said.A lot will now depend on China's skill in keeping its booming economy decoupled from the sagging ones in America and Europe. For now, we Australians can only hold our collective breaths and hope our luck, once again, lasts.
© 2008 Sydney Morning Herald