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With strong global headwinds battering the still fragile post-COVID economy, the last thing Australia needs is a slowdown in its primary trading partner and primary strategic rival, but it appears as though the “Lucky Country’s” luck may just about to run out.
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From our vast endowment of natural resources – from iron ore, coal, gold, uranium, copper, natural gas and now rare earth elements – to our world-leading breadbaskets that have helped lift hundreds of millions out of starvation and our often humble, but truly world-leading innovation sector, few nations have the unbridled economic potential of Australia.
However, this has meant Australia has become unique among many of the global “developed nations”, with a largely underdeveloped and uncomplex economy solely dependent on the export of raw resources, energy, agricultural produce, real estate speculation, and a select group of services from the “knowledge economy”.
Driving this devolution in the national economy is the economic rise of the People’s Republic of China following the “opening up” of the Communist regime to the world, led by Australia under Gough Whitlam and then formalised with the United States by President Richard Nixon seeking to hedge against the Soviets.
Propelled by a wave of economic liberalisation efforts by Deng Xiao Ping, beginning in the late-1970s and then beginning to take off in the 1980s, the economic symbiosis of Australia and China has seen immense wealth transform the economies and populations of both nations, now, however, the chickens are coming home to roost for Australia, in particular.
This broader global economic transformation has now given rise to increasing great power competition and multipolarity being spearheaded, in large part, by Australia’s largest trading partner, the People’s Republic of China, in its attempts to build a parallel global system defined by its antithetical position to the US-led world order.
While Beijing certainly isn’t alone in pursuing this ambitious, epoch-defining agenda, Russia, India, Brazil, South Africa, Iran, Turkey and others from across the “developing world” through organisations like BRICS and the Shanghai Cooperation Organisation, it is by and large dominated by China.
As a result, Australia’s economy has been front and centre for Beijing’s overt attempts to coerce and bully nations across the world into complying with its view of and designs for a post-America, new world order.
However, as Beijing’s own economic chickens have come home to roost, amid growing concerns of a sharp economic slowdown across the Chinese economy, this, as a whole, has raised concerns about the stability of the regime, its broader geopolitical intentions, particularly around the future of Taiwan and, most concerningly for Australia, its impact on Australia’s own, struggling economic outlook.
Highlighting this growing concern is Australian Strategic Policy Institute (ASPI) senior fellow David Uren in a worrying analysis titled Great while it lasted: Chinese demand for Australian minerals is sagging, in which he detailed the impacts on Beijing’s economic slowdown on the “Lucky Country’s” own economic future.
Uren began the analysis, stating, “Australia’s 20-year-long economic party, funded by China, may be drawing to a close, with consequences for federal and state budgets, superannuation returns and living standards generally. The iron ore price is the most obvious pointer to China’s declining demand for Australia’s raw materials: it has come down from an extraordinary peak of US$144 (AU$211) a tonne at the beginning of January to a spot price of US$92 (AU$135) this month, and the fall is expected to continue.”
Iron ore is the canary in the coal mine
Sorry, no pun intended in the subheading, it was a happy coincidence.
Australia’s dependence on exports – particularly “low value add” exports – mainly resources like iron ore, have, for the better part of the last two decades, served to keep the nation out of recession and as the basis for much of our economic prosperity, with wide-reaching impacts across the nation.
Uren detailed this, explaining, “The prices Australia receives for its exports, relative to what we pay for our imports, have never been better than over the last two years. Our returns from trade have been even greater than during the peak of the resources boom in the early 2010s...
“The benefits of the bonanza have been widely spread. The resource companies and their shareholders, including most Australian superannuation funds, have achieved extraordinary returns. Resource company tax payments have delivered healthy budget surpluses to the federal government, despite its spending rising to the highest level in almost 40 years. Royalties have boosted the finances of the West Australian and Queensland governments,” Uren said.
For many, this information wouldn’t be surprising, for others, it would come as a shock, nevertheless. Australia is a nation that is foundationally built on the backs of miners, whether it is for iron ore, coal, gold, copper, uranium or any other host of the vast mineral wealth our nation is home to.
This also makes sense as to why Australia has, in large part, fulfilled the prophecy of Donald Horne and his intent for the moniker of the “Lucky Country” to be used as a replacement for the “Lazy Country”, because in large, the mineral wealth has come easy.
That is not to disparage the hard work of Australian miners in any way, it is rather an effort to detail just how seductive it has become for Australian policymakers to “take the easy way” by letting “low value add” and “low complexity” industries like mining and agriculture dominate the national economic and industrial base.
However, the mounting weakness in China’s economy is now part of broader global economic headwinds that are serving to significantly impact Australia, a nation where we have been in an admitted per capita recession for at least the last 18–24 months and, arguably, if not longer if you ask most people.
Uren unpacked the impact of this, stating, “But China is now bumping up against the limits of its export-driven economic model. Export growth is slowing and steel production is falling. Steel output in July was down 9 per cent from the previous month, leading the chair of China’s biggest steelmaker, Baowu Steel Group, Hu Wangming, to warn staff at the company’s half-year meeting that conditions were like a ‘harsh winter’ that will be ‘longer, colder and more difficult to endure than we expected’.”
Going further, “It is a chill that will likely be felt in Australia. Already, Treasurer Jim Chalmers is warning that the federal budget balance will deteriorate, while the impact of weaker exports will flow through to superannuation returns, the value of the Australian dollar and the cost of imported goods. Living standards will suffer.”
Chilling implications economically and strategically
This new reality should rightfully send chills down the spine of every Australian, no matter their age or profession and for more than just the obvious impact on our personal and national wallets, respectively.
It should also prompt both sides of Australia’s policy-making community to wake from the comforting slumber that has ensconced us as a nation, a people and an economy, and begin to seriously consider diversifying the national economy away from being a mine, farm and real estate speculation hub towards embracing a hospitable regulatory and policy framework and to nurture an export-focused reindustrialisation of the national economy, with a focus on the future.
Equally, it should prompt major concern among the strategic policy community and our policymakers as declining economic opportunity and prosperity in the Chinese domestic market only serves to make the rising superpower increasingly unpredictable, volatile and the regime itself more desperate to distract from its failures.
After all, nothing stimulates a flagging economy quite like a war.
Final thoughts
If Australia is going to survive and thrive in this new era, Australia’s policymakers and the public are going to have to accept that while the world is increasingly becoming “multipolar”, the Indo-Pacific, in particular, is rapidly becoming the most hotly contested region in the world.
All of this is underpinned by the emerging economic, political, and strategic might of powers like China, India, Pakistan, Thailand, Vietnam, and the established and re-emerging capability of both South Korea and Japan in particular, are serving to create a hotbed of competition on our doorstep.
Recognising this array of challenges and opportunities, both the Australian public and its policymakers urgently need to look beyond the myopic lens that has traditionally dominated our diplomatic, strategic, and economic policy making since Federation.
Ultimately, we need to see Australia begin to play the long game to fully capitalise on the opportunities transforming the Indo-Pacific.
The most important question now becomes, when will we see a more detailed analysis and response to the challenges and opportunities facing Australia and when will we see both a narrative and strategy that better helps industry and the Australian public understand the challenges faced and opportunities we have presented before us?
As events continue to unfold throughout the region and China continues to throw its economic, political, and strategic weight around, can Australia afford to remain a secondary power, or does it need to embrace a larger, more independent role in an era of increasing great power competition?
Importantly, Australia, its policymakers, and people must avoid the pitfalls of being seduced by shiny objects and hold true to the values and principles of the nation.
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at
