China Set to Rescue Australia Economy at Just the Right Time

A precipitous decline in global commodity prices since 2011 left Australia struggling financially, but the recent Chinese stimulus spending brightened the economic prospects. Exports are increasing as Chinese manufacturing and industry ramps up, and Australia is “the developed world’s most China-dependent economy,” reports Michael Heath for Bloomberg. During the period of low commodity prices, the Australian mining industry invested less. That shifted the industry’s supply curve downward, and that contributed to high prices now. Prices of coking coal, a key ingredient in making steel, have almost tripled this year, which could increase Australia’s nominal GDP by two percentage points. The Australian government is paying attention: since July, its economy shrunk by 0.5 percent, “only the fourth quarterly contraction in the past 25 years,” Heath writes. There may be reason for optimism, as the monthly deficit decreased by more than $US 2 billion from December 2015 to September 2016. – YaleGlobal