Australia and Canada’s economies: The woes of rich commodity exporters

Posted: September 7, 2015 in economy
Tags: , ,

BEFORE the financial crisis, gambling on resource extraction seemed to be a one-way bet for the Australian and Canadian governments. During the commodities super-cycle of the mid-2000s, China absorbed new supplies of metals and energy as quickly as projects could be brought on stream, keeping global prices high. Boom towns sprung up in Alberta in Canada and Western Australia to house miners and builders constructing expensive pipelines and terminals. Only last year the Australian prime minister, Tony Abbott (pictured on the left), announced that coal was “good for humanity” as he opened a mine in Queensland.But times have changed. Commodity prices are falling. Iron ore, oil and coal are all trading at less than half of their prices in 2011. This is causing problems for governments of developed nations that have relied on mining and energy sectors for growth in recent years. Canada, the world’s fourth-largest oil exporter, is now in recession, thanks to lower spending on machinery and equipment for the energy sector. Growth has also slowed to a crawl in Australia: exports in the second quarter subtracted a hefty 0.7 percentage points from growth, because Australia’s terms of trade—the ratio of export prices to import prices—have fallen by more than 10% since mid-2014.Yet investment in the mining sector is not quite as weak as many economists once predicted. Falling …

via Economic Crisis


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