The Australian economy is basically the Chinese economy, and right now (and for a while going forward) that’s going to be a problem.
And as you can see from this UBS chart, when China trade data slows, Australia’s slows with it. Australia’s economy is driven by mining and exporting commodities, much of which are sold in China. That means any slow down in Chinese demand is brutal for Australia.
China is slowing as the government tries to transition the economy from one based on investment to one based on consumption. Unfortunately, the consumption just isn’t totally there yet, so the economy’s slowing faster than government officials would like.
For example, manufacturing PMI fell again in March to to 49.2 and anything below 50 signals a contraction. In February the number moved slightly above 50, and it’s been bobbing back and forth that way for months.
China has said that it’s watching these figures as well as inflation to determine if it has to take action to pump money back into the economy — something it said it wouldn’t do.
Until then, though, all of the countries that export to China are taking a hit, and Australia is getting hit the hardest.