Australia’s Treasurer, Jim Chalmers, has warned that Australia’s biggest trade partner, China, could experience its worst economic growth in almost 50 years.
Last year, China, the world’s second-biggest economy, grew by 5.2 percent. But Dr. Chalmers said China’s growth pace was likely to have a ‘four’ in front of it for three years in a row – marking the slowest expansion over several years since the era before the country opened up to world trade in 1978.
In December, the World Bank forecasted that Chinese economic growth would slow to 4.5 percent in 2024.
During the Covid lockdowns, China’s economy shrunk by 2.2 percent in 2020 but bounced back to 8.4 percent in 2021.
The fears about a slowing Chinese economy are being publicized just weeks after China scrapped the 200 percent tariffs on Australian wine imposed in 2020 in retaliation to former prime minister Scott Morrison’s call for an inquiry into the origins of Covid.
China is the biggest iron ore customer—until recently, Australia’s most valuable export was used to make steel.
The spot price of iron ore has plunged by 30 percent from $US142 a tonne at the start of January to $US99 in early April.
The commodity had risen from $US100 a tonne in September last year.
However, Treasury’s Mid-Year Economic and Fiscal Outlook, released in December, predicted iron ore would be worth just $US60 a ton by September 2024, marking another 39 percent plunge from this month.
Next month’s Budget for 2024-25 is expected to have even more pessimistic forecasts.
A weaker iron ore price means less revenue from federal government royalties for mining companies like BHP, Rio Tinto, and Fortescue.
Until 2021-22, iron ore was Australia’s most valuable export.
However, in 2022-23, coal overtook it to be worth $127.423 billion, compared with $124.101 billion for iron ore, Department of Foreign Affairs and Trade figures showed.
