The price of iron ore pushes the Australian economy above Brazil and close to Russia
Australia can thank the booming price of its largest export iron ore, which currently brings in $ 136 billion a year, for propelling the economy past Brazil and bringing it closer to Russia in one just over 12 months since the start of the covid-19 pandemic.
Australia’s economy has garnered admiration around the world as it rebounded from last year’s downturn, outperforming most countries.
Australia’s gross domestic product, a measure of the monetary value of goods and services produced, climbed to US $ 1.43 trillion (Australian $ 1.86 trillion), while Brazil’s fell to 1 , $ 42 trillion (AUD $ 1.83 trillion), according to Bloomberg data.
Soaring iron ore prices were the main driver of Australia’s rise, overtaking the Brazilian economy for the first time in 25 years.
“Australia’s economy has performed exceptionally well, but it’s basically a story of iron ore prices,” said IFM Investors chief economist Alex Joiner. Australian Financial Review.
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He added that it was good for the country and it fuels the elements that determine the standard of living.
Strict lockdown measures have had an impact on the Brazilian economy and despite Melbourne’s latest outbreak, Australia has managed to limit some of the financial fallout from the pandemic.
Meanwhile, Russia’s nominal GDP fell to US $ 1.48 trillion (Australian $ 1.91 trillion) in the fourth quarter of 2020, and Australia’s to $ 120.7 billion (1, $ 55 trillion), closing the gap of about US $ 84.2 billion. (AUD 108.8 billion).
“Our fiscal situation has been so improved by the prices of iron ore. It’s a modern reinvention of ‘we are the lucky country’, “Dr Joiner told the AFR.
“It’s an extraordinary tailwind for the economy and it’s an extraordinary gift for the government which benefits from the revenues that we receive.
Figures show Australia’s economy is expected to become the world’s 12th largest economy in 2021, up two places from 2019, according to the International Monetary Fund.
Australia’s GDP will be around $ 2 trillion, but the country is home to only 0.3% of the world’s population and accounts for 1.6% of the global economy.
China previously announced a plan to lower the cost of Australia’s largest export, but so far little impact has been felt. China buys 60% of Australia’s iron ore.
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The price of iron ore soared 10.3 percent on Wednesday to US $ 209.10 a tonne, according to CommSec. This comes after a 5.9% increase on Tuesday.
Experts said doomsday predictions of a “sustained downward trend” in the price of iron ore are “unlikely.”
The price of the precious steel raw material had collapsed after hitting a record high of over US $ 230 per tonne last month, but it is on the rise again.
Beijing says soaring ore prices endanger China’s economic recovery from the pandemic, with ordinary Chinese businesses and citizens bearing the cost.
Michael Shoebridge, director of defense, strategy and national security at the Australian Strategic Policy Institute, said the iron ore situation had revealed a “frustrating reality for Beijing”.
“The Chinese state clearly wants to reduce its dependence on Australian iron ore,” he told news.com.au. “But China’s demand for iron ore for steel production to fuel national construction and its manufacturing export engine makes it highly unlikely that the Chinese economy can function without it.”
He said Beijing, as part of its diversification plans, was looking to exploit untapped deposits in Africa.
However, he said the scale of Chinese demand is likely to ensure that Australian exporters will retain a significant share of the Chinese market for a few years, despite everything the CCP does.