This could have significant consequences for the Australian economy. I have never been comfortable with what appeared to be an over confident belief in Australia that we should basically put all our eggs in one basket. In this case, China’s basket. 12 months ago we were booming and it was all due to a strong and what appeared to be never ending export trade to China.
Mining in particular was the big winner and thousands of people left careers to chase the big money in the mining sector.

News reports were glowing and told of almost never ending riches. They all believed China would continue it’s massive growth at least for the next 10 years.

This week BHP announced over 3,000 jobs would be going, more than half from Western Australia alone. They are basically shutting down one of their nickel mines as prices dive.

It is going to be a very rocky road in 2009.

WAToday reports:

China may never again power the Australian economy like it has over the past five years, posing huge risks to the local economy, ripping billions from exports, and almost certainly driving the budget into deficit.

In figures significantly worse than the Rudd Government was anticipating, China’s National Bureau of Statistics yesterday said annual growth almost halved from 13 per cent in 2007 to 6.8 per cent in the year to December – below the arbitrary 8 per cent threshold that Chinese leaders say creates risks of social instability.

Citigroup calculates the economy shrank 0.1 per cent in December from the September quarter – the first contraction in at least 16 years.

Frank Xu, the head of mergers and acquisitions at China International Capital Corporation, said 2008 was likely to mark the peak of China’s appetite for Australian resources, particularly iron ore. He said the resources boom, which inflated Australian commodity export prices by 150 per cent over five years, was driven by China’s unprecedented and unsustainable growth in exports and building of factories and infrastructure.

Read rest of article.