As “unimaginable quantities of Aussie iron ore flood ex-China markets”, global iron ore prices will collapse,
“China absorbs more than a billion tonnes of seaborne iron ore. Australia ships around 700mt there every year. Some large slice of this will be progressively dumped on other markets,”
The bigger hit, however, will be to national income – Australia will reap at least $150 billion this year in export revenue from iron ore, “nearly all” of which will “be wiped out by the combination of volume and price pressure”.
That also gives us a very good guide to what will happen: Nominal growth will be crunched; Inflation and wages will be hit for years; The budget will be a sea of red; Mining stocks will fall; Bonds yields will plunge; AUD will crash,” Llewellyn-Davis warned.
On top of that, Australian house prices “would tumble”, “radically devaluing versus the world via the collapsing currency
Cool, fingers crossed then motherfuckers...
Expect the crash to happen before the iron ore flow stops as overseas property owners rush to sell and cash out before the bottom drop off the market. I would be amazed if Chinese property owners, especially investment buyers who are not living in Australia, are not already quietly trying to offload their property before they start to take big hits. And guess who will be left hold the bag when the crash comes? Australian natives who need homes to live in and who cannot easily sell off even if they are aware of the pending disaster.
Looks like Australia is determined to be the poster child of what needlessly fucking with your biggest customer looks like.
Oh, and Australians should not expect to simply be able to dump their excess iron ore on the world market, because you can bet every other producer has already got anti-dumping complains drafted and ready to go straight away.
If China really wants to turn the screws, they can demand origination documents and massively increase penalties for abuse for iron ore it imports to ensure those are not Australian iron ore coming in via 3rd parties. Chemical analysis should be able to easily flag Australian iron ore faking as other countries, and anyone caught trying to pull a fast one will be fined into oblivion and locked out of the Chinese market, which will be a death sentence.
If China really wants to fuck with Australia, it can do so in so many ways that it can basically reduce Australia to 3rd world country status economically. At the same time China can give Indonesia preferential rates on offensive weapons such that in a couple decades, Indonesia will seriously fancy their chances against a cash strapped and wore out Australian military. Australia can have the Red Dawn it always obsess about, only China doesn’t need to send a single soldier.