Rod TyersandYixiao Zhou

Opinion | How an all-out trade war with China would cost Australia 6 per cent of GDP

The effects of a trade freeze on Australia’s economy and real disposable income are big while those on China are mosquito bites by comparison

Australia produces few manufactured goods and pays for the considerable quantity it imports by exporting commodities, mostly to China

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Australia produces few manufactured goods and pays for the considerable quantity it imports by exporting commodities, mostly to China. Photo: Shutterstock

Rod TyersandYixiao Zhou

Published: 10:52am, 1 Dec 2020Updated: 10:55am, 1 Dec 2020

China accounted for more than one-third of the export dollars Australia earned in the 12 months to October, covering the period of coronavirus disruptions and disputes over trade.

The figures, which apply to physical exports rather than harder to measure services, are dominated by record high Chinese takings of Australian iron ore – but they might not last.

China is changing, transitioning from growth driven by the iron-ore hungry expansion of cities and manufacturing to growth driven more by the supply of services.

Externally, its belt and road infrastructure investments facilitate the supply of resources from locations other than Australia, among them the Simandou iron ore and bauxite deposits in Guinea, West Africa that will eventually offer higher quality ore than Australia from a region China may regard as more friendly.

A miner holds a lump of iron ore at a mine located in the Pilbara region of Western Australia. Photo: Reuters

Even if this source is slow to emerge, China will seek to diversify its supplies of iron ore by other means, as suggested by Australia’s former ambassador Geoff Raby in his recent book China’s Grand Strategy and Australia’s Future in the New Global Order.

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