Australia’s record trade surplus provides huge wake-up calls

Australia’s prosperity is built almost entirely on exporting to China and selling CO2-emitting commodities to a global marketplace. How long can it last?

The trade figures are mind-bogglingly extraordinary – both in the spectacular dollar numbers that are in our favour, and also how quickly they have leapt back, and then some, from the depths of Covid in mid-2020.

They also provide two, huge, and I mean huge and sobering, wake-up calls.

Australia’s export prosperity is built almost entirely on two things – selling to China, and selling coal, gas and above all iron ore into the global marketplace.

China? China? Now where have I heard that word before. Oh yes, both sides of politics agree China is our most dangerous global enemy and biggest regional threat.

Somehow, I see the contradiction as just a tiny bit of a ‘problem’ going forward – our biggest enemy being the foundation of our prosperity.

Even if their students haven’t yet started streaming back in the numbers of 2019; and the ‘whales’ – the Chinese billionaires and multi-millionaires – probably will never be coming back to the Crown and Star casinos, with their suitcases, figuratively and apparently also quite literally, stuffed with Yankee and Aussie dollars.

The second wake-up call is what we sell – mostly, the emission of CO2 somewhere else in the world. It’s coal and gas that emit the CO2 directly and iron ore which is only of any use when combined with coal and CO2 is emitted.

The Greens - from their, OK, insane, but entirely logical perspective - want a total ban on any new coal mines and gas developments.

And they would really like to stop all the existing mines and gas projects, as well.

While the new Labor government has rejected both, isn’t that the ultimate reality of a world that actually embraced net zero?

Australia’s export prosperity is built on selling coal, gas and iron ore into the global marketplace.

Yes, it’s supposedly a quarter century away – yes, just like the year 1997 is to today. Does that seem so far in the past?

As I understand, the Greens and Labor – yes, and Labor – want to replace those coal and gas export billions by selling the world sunlight and bottled wind in the form of ‘green’ hydrogen.

Hmm.

So to the big numbers.

We had a massive near-$18bn surplus on trade in the month of June alone – way higher than any other month ever. It made for a thumping $136bn surplus for the year.

That’s over $5000 for every single Australian. Much of which did flow into Canberra’s coffers and on, indirectly, out to you. Not that long ago we were lucky to break-even – getting as much for our exports as we spent on buying ‘stuff’.

It’s not all, but it’s a hellavu lot, about China.

In the 2021-22 year our two-way trade with China added to a massive $270bn. We sold them $170bn of mostly iron ore and gas and probably, indirectly, coal. We bought $100bn of ‘stuff’ from them.

It’s an interesting question who gets the better end of it. They get our natural resources to provide cheap and reliable power and to build their industrial base – which we are too ‘pure’ to use.

We in return get ‘stuff’, the 21st century version of Aldous Huxley’s ‘soma’, to keep us entertained and sedated.

Interestingly, as CommSec’s Craig James notes, we doubled our trade surplus with India, to just under $17bn, albeit still a fraction though of the $70bn surplus with China.

They of course want and buy the same stuff China does.

The near $18bn monthly surplus is more than double the $6-9bn monthly surpluses just before Covid, and the surplus of just $3bn in August 2020 when the world had closed down.

Similarly, our total monthly exports, peaking at $35bn in early 2020 just as Covid was hitting, then dropping to around $28bn a month, were up to $56bn in June – a staggering doubling from the Covid depths.

How long will it last?

Originally published as Australia’s record trade surplus provides huge wake-up calls