Coronavirus: Iron ore surges, tourism to follow

Australia’s economic recovery has received a significant boost, with Chinese demand sending iron ore exports surging to a ­record high.

The reopening of Queensland’s borders couldn’t have come at a better time for the state’s tourist operators, particularly in the far north of the state.

Australia’s economic recovery has received a significant boost, with Chinese demand sending iron ore exports surging to a ­record high and the tourism ­industry declaring Queensland’s reopening of its borders with Sydney and Victoria will add hundreds of millions of dollars to the national economy.

But as optimism grows of a smooth and rapid exit from the worst downturn in almost 100 years, Reserve Bank deputy governor Guy Debelle said it would take years to undo the damage from the COVID-19 recession and cautioned the Morrison government against prematurely withdrawing support.

Speaking at an Australian Business Economists event on Tuesday, Dr Debelle said a clear lesson from the previous global recession in 2008 was “be careful of removing the stimulus too early”. “A number of European countries learned this lesson to their cost after the global financial crisis,” he said.

Despite Dr Debelle’s cautionary tone, Josh Frydenberg said the government was proceeding with stimulus measures, including extending JobKeeper payments and proceeding with income tax cuts and hiring credits. The Treasurer also said Queensland’s decision to reopen its border with Sydney and Melbourne would help hasten the economic recovery.

“Closed borders cost jobs, so the quicker state borders are open in a COVID-safe way, the better for local communities and the tourism sector, both of which have suffered greatly,” he said.

That decision will provide a timely boost to Queensland’s tourist sector ahead of the crucial summer period, especially those who have suffered the disappearance of international visitors after the country’s borders were closed in February.

The Australian Tourism Industry Council, which represents the state, estimates an economic benefit of up to $588m a week from the reopening of borders.

The Queensland government’s decision came as trade figures showed Australian iron ore export earnings surged to a record high in October, climbing $1.8bn to $10.9bn for the month.

Iron ore accounted for more than a third of the country’s $30.5bn total international goods sales in October as Chinese demand for the steelmaking commodity ramps up, data from the Australian Bureau of Statistics showed.

“There’s a lot of good news,” ANZ head of Australian economics David Plank said.

While export volumes rather than earnings fed into real GDP — which adjusts for prices — high iron ore values were providing a boost to confidence and investment activity in Western Australia, Mr Plank said.

November is likely to be another strong month for our miners, with the iron ore price surging above $US130 a tonne this week.

CBA analyst Vivek Dhar said rising steel mill profit margins in China were driving the recent lift in the iron ore price.

A raft of upbeat economic indicators, including booming consumer confidence and much stronger than expected employment growth last month, suggests the economy is managing what Deloitte has termed a “beautiful” recovery from the sharpest quarterly contraction on record over the three months to June.

Ahead of September quarter national accounts figures next Thursday, Dr Debelle said the economy looked poised to grow “decently” over the second half of the year.

But the sheer scale of the hit to the economy resulting from the partial closure of the economy during the height of the pandemic meant it was far too early for policymakers to grow complacent. It will be years “before we are anywhere close to a desirable outcome”, Dr Debelle said, adding: “There’s a hell of a lot of uncertainty out there.”

He also said a vaccine would not be an immediate cure to the country’s economic problems, with it taking time to immunise Australians and the rest of the world.