Print options

August 29, 2013

As China Boom Fades, Economy Dominates Australia Election

by Phil Mercer

Australians vote in a federal election on Sept. 7 to determine the members of parliament.  Prime Minister Kevin Rudd will attempt to win a third term for the incumbent Labor government against the opposition coalition led by Tony Abbott of the Liberal Party of Australia.

The state of the economy has become the key issue for voters. A decade-long mining boom fueled by demand from China is diminishing, and unemployment is creeping upwards.  As campaigning approaches its final week, both major parties are trying to convince voters they can guarantee future prosperity. 

Australia was fortunate to dodge the worst of the global financial crisis thanks to rich reserves of iron ore and coal.  But as China’s once-ravenous appetite for resources weakens, Australia’s healthy economic glow is beginning to fade.

Candidates' platforms

Prime Minister Kevin Rudd argues the country is at a crossroads, and must quickly adapt to life after its minerals bonanza.

"When I was first elected leader of the opposition, I argued long and hard that Australia had to prepare for the day when the mining boom would be over. The truth is in 2013 the China resources boom is over.  Right now we find ourselves at a crossover point for our national economy,” he said. 

In this election year, the conservative opposition says the Prime Minister will lead Australia’s economy astray through debt and mismanagement.

Opposition Leader Tony Abbott says his coalition can fix the economy.

“Under a Coalition government we will build a stronger economy, we will abolish unnecessary taxes, we will get the budget back into the black.  We will be a consultative, collegial government,” he said.

The Labor government, though, is hoping for economic salvation though a resurgence in manufacturing, agriculture, the building industry and tourism.

Unemployment here is low by global standards, but is at a four-year high at almost six percent.

Warren Hogan, chief economist at ANZ bank, says the jobless rate will continue to rise.

“The transition to the non-mining recovery is nowhere to be seen at this stage," he said. "There [are] hints of it, but it’s certainly not showing up in the contemporary data and hence the unemployment rate is likely to drift higher for the second half of this year.”

Mining boom ending

In some circles, there is a distinct sense of gloom about the future health of the economy as China’s demand for Australia’s resources weakens.

Former Reserve Bank board member Bob Gregory believes the end of the mining boom in Australia will be painful.

“If you think that we have avoided all the big shocks that Europe has, and in some sense our ability to avoid that is weakening, then it could be a substantial shock. For example, the mining investment doesn’t stop tomorrow, [it] will on for three or four years, but it is clearly running down and as it runs down it will be laying off workers.  There is a good chance - or a chance - that it will be a substantial shock,” said Gregory.

In these tougher times, having a long list of qualifications is no guarantee of employment.  Sitting at a cafe in Sydney, a man who identified himself only as Stuart recounted his difficulty finding a job.  He says despite holding a college degree and an ability to speak several languages, he has been jobless for more than two years.

“No, at the moment I am not working," he said. "I have got a bachelor in fine arts and I have got a diploma in graphic arts, so I cannot get a job. It is very depressing.  I mean, you can come here and have a coffee, then what?  You cannot sit eight hours here. When you go home it is the same situation; you are not working, your wife is not working.  So, it is a bit tight, pretty tight for all of us, basically.”  

Economists warn that Australia, which has been blessed by rich natural resources, is running out of time to re-ignite sluggish industries as the mining boom slows more rapidly than expected.  The election on Sept 7 is likely to hinge on which major party can convince voters that they can manage this economic transition the best.