"Chinatown"-Official media of Chinese Australians

Last month, Gina Rinehart, Australia's richest man and head of the Hancock mining dynasty in Perth, sent a shocking message to her workers at the Western Australian mine: either a 10% pay cut or the risk of future layoffs.


Ms. Rinehart's family has accumulated huge wealth in the iron mining industry, but her wealth has shrunk sharply from the bloody drop in commodity prices last year. Three years ago, she had a fortune of about 3 billion US dollars, but now it is only about 300 billion.

This huge shrinkage is actually a microcosm of the problems facing the Australian economy. Australia has been called a lucky country for many years because of its rich mineral deposits. In the boom years of the so-called "super-cycle" of commodities, China bought as many minerals as there were in Australia. At that time, Australia's economy was very similar to the oil-rich Saudi Arabia.

While the rest of the world is suffering the consequences of the global financial crisis, the Australian economy, which is tightly tied to China, seems to be dripping, enjoying low unemployment and a healthy trade surplus.

However, the decline in the prices of iron ore and raw coal, as well as the cuts in investment by large international mining companies, have exposed the real weakness of the Australian economy. Like Saudi Arabia, which uses foreign exchange reserves to compensate for falling oil prices, Australia is facing a huge decline in export profits.


In 2012, 65% of the Australian economy's income came from resource-related industries, and such a huge price drop cannot be absorbed without causing widespread harm. The reduction in foreign exchange income has forced the Australian government to borrow more foreign debt to maintain government spending. The respected Australian economist Stephen Kouloulas mentioned the harm that repeated increases in foreign debt levels may bring to the next generations. The long-term low commodity prices will turn Australia into the Greece of Asia, and China, not the EU, will play the role of the last straw?

Koukoulas pointed out that at the end of the first quarter of 2015, Australia’s external debt reached US$9550 billion, which is close to 60% of Australia’s GDP. Although this debt level is much lower than that of Greece-the latter's external debt is 175% of GDP-so much foreign debt is unsustainable, and debt is still increasing.

The Australian government and central bank bet on the depreciation of the Australian dollar to partially offset the consequences of the decline in mining. But the effect of this policy has not yet reached the point they expected. Although recent business surveys have shown a rebound in confidence, outside of mining, economic imbalances are severe, and the only area with significant growth is real estate.

The problem is that after decades of economic diversification, Australia looks more like the petrodollar economy in the Middle East, but it does not have the huge foreign exchange reserves held by Middle Eastern countries to support the decline in commodity prices. Australia has to continue to borrow to maintain the standard of living that the country is accustomed to, even though some Greeks admit it is unsustainable.

News compiled from "Sydney Morning Herald"

Welcome to the news and discuss cooperation! Editor-in-chief of "Chinatown" WeChat/QQ: 28771796


Go to the "Chinatown News" Fcebook page and click like, you can know the latest Australian ๑play, ๑immigration, ๑life information anytime and anywhere ☆✿~
"Chinatown" WeChat subscription account is now available, allowing you to keep track of more updated Australian information every day
WeChat subscription account: news-china-com-au