The Australian economy rebounded strongly in the first quarter of this year, with growth even returning to levels seen last year before the outbreak caused Australia’s first recession in 30 years, according to data released by the Australian Bureau of Statistics on Wednesday (June 2).
In the fourth quarter of last year, Australia’s economy grew at a revised rate of 3.2 percent. Before the data for the first quarter of this year, economists predicted growth of 1.5 percent, but the actual growth rate of 1.8 percent in the first three months of this year, surpassing the economists’ forecasts.
The Australian Bureau of Statistics data also showed that Australia’s exports also grew across the board, completely defusing fears of a plunge in exports due to the loss of Australia’s market to China as a result of Chinese trade sanctions. The data shows that when China, Australia’s largest trading partner, decided to close its market to many of Australia’s commodities, Australia went all out to develop new alternative markets and made significant gains in this regard.
In the high-profile issue of coal exports, in April this year alone, Australia’s coal exports to India broke the record for coal trade between the two countries. Australia exported a total of more than 15 million tons of coal in April this year, up 14 percent from an eight-year record low in March this year. Australia has been unable to export coal to China for the fourth month in a row, and coal exports to Vietnam have also declined. But the shortfall in imports of Australian coal from these two countries has been partially made up by increased coal exports to India, South Korea, Taiwan and Japan. Australia continues to focus on smaller markets like Indonesia, Thailand, the Netherlands, Malaysia, the United Arab Emirates, the Philippines and Pakistan as it responds to Beijing’s import ban and expands its coal export markets.
China used to be Australia’s largest trading partner and market, and Australia was one of the few Western countries to enjoy a surplus in trade with China. But Australia’s exclusion of Huawei from building Australia’s 5G network on national security grounds has sparked discontent in Beijing. Australia’s call for an independent investigation into the new crown virus last year further angered Beijing. China subsequently imposed import restrictions or bans on Australian goods including coal, barley, wine, beef and cotton on various pretexts, including anti-dumping or countervailing, sparking fears that Australian goods would not sell or that the economy would be hit hard. According to the Roe Institute, the total value of Australian exports of these goods to China in 2019 is about $25 billion, or about 1.3 percent of Australia’s gross domestic product.
Australia’s exports to China, with the exception of coal, were worth about $9 billion for most of 2020, said Roland Rajah, chief economist at the Roy Institute. But as China tightened those restrictions late last year, the value of Australia’s exports to China fell by about half again. But after China’s restrictions intensified, Australia accelerated its search for alternative markets and quickly found new ones for those commodities, Raja noted. On an annual basis, Raja said, Australia’s annual exports of these commodities are expected to increase by $4.2 billion, which would make up for much of the loss of exports to China.
Coal is the commodity that has performed best in breaking the Chinese ban, Raja said, because by January this year, the value of Australia’s coal exports to the world had increased by $9.5 billion on an annual basis compared with the value before China’s ban.
In China, by contrast, the nation’s coal and iron ore users and downstream consumer industries are facing hardships as the price of Australian iron ore and coal continues to rise on the international market, causing Chinese raw material prices to soar. China’s Development and Reform Commission and five other government regulators have recently conducted several emergency interviews with the heads of key companies involved, ordering them to stop monopolistic manipulation of iron ore prices and to assist the government in easing the pressure of rising prices and stabilizing the market.
Among Australia’s exports to China, wine and beef are currently the most affected, as the export figures for these two commodities have not been impressive since the ban was imposed by China. But Raja believes that the decline in Australian wine and beef exports may not be related to the China-Australia trade dispute because of the very severe drought Australia has experienced. Wine and beef production was already insufficient.
Australian Deputy Prime Minister Michael McCormack McCormack (Michael McCormack) said in an interview with CNBC last month that Australia is looking to diversify its export markets. He also gave the example that Australia has exported the first shipments of barley to Mexico.
Australia’s Trade Minister Dan Tehan Dan Tehan, Australia’s trade minister, said last week that Australia would ask the World Trade Organization to set up a dispute settlement panel to resolve the issue of China’s restrictions on Australian barley imports. In an interview with CNBC on Wednesday (June 2), Tehan said Australia is also considering whether to seek the intervention of the World Trade Organization to solve the problem of China’s restrictions on Australian wine imports.