The Australian mining boom built over a decade on Chinese hunger for energy and raw materials is turning into bust for many business owners as China’s cooling growth reverberates through a country accustomed to winning from the rise of an Asian economic giant.
Endowed with vast mineral resources, Australia has been the envy of the Western world for avoiding recession during the global financial crisis while other wealthy countries drowned in debt. But the country now faces a potentially painful transition as it weans itself off a heavy reliance on its two biggest exports, coal and iron ore.
Australia’s dilemma underscores that China’s long run of supercharged growth has given it enough weight in the world economy to create not only winners, but losers too when its own fortunes change.
Trade between Australia and China equaled 7.6 percent of Australia’s $1.5 trillion economy last year, a dramatic threefold increase from a decade earlier, according to an Associated Press analysis of trade data. During that time, mining companies gushed multibillion dollar profits while jobs as mundane as maintenance commanded salaries above $120,000.
Now the downside of that tight embrace is being felt across Australia’s mining heartlands and in its bustling cities. The number of jobless is expected to increase more than 70,000 in coming months and the government’s finances are turning a deeper shade of red, forcing cuts to public services.
Andrew Howard has done well from buying and selling jumbo-sized earth moving equipment from his base at an industrial estate in the tropical northeast coast city of Mackay, the largest mining service center in Australia’s richest coal country, the Bowen Basin.
At the height of the global financial crisis, he traveled to the United States to buy up machinery cheap in a depressed economy and later sold it to a resurgent Australian mining industry.
But now Howard plans to shut the doors of his business AFG Equipment in late August after operating for a decade that tracked the rise and fall of Australia’s mineral boom.
“There’s just absolutely nothing happening. We’re just treading water,” he said. “It may bounce back in 12 months, it may bounce back in five years, it’s hard to say.”
With China recording its fifth straight quarter of growth below 8 percent, Howard isn’t optimistic that Australia’s biggest export market will rekindle the cooling mining industry any time soon.
“Everyone realizes it’s pretty serious this time,” he said. “This is probably as bad as we’ve seen it.”
China’s response to the global recession was to pour hundreds of billions of dollars into new highways, bridges, bullet trains and factories, unleashing a new wave of demand for Australia’s mineral riches that helped extend its mining boom. But new communist leaders are resisting calls for another round of stimulus, preferring instead to let the economy settle at a growth rate of 7 to 8 percent _ still far outpacing developed countries but a substantial shift lower from earlier double digit expansion.
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