By Christian Edwards
SYDNEY, Jan. 10 (Xinhua) -- It's been an anxious journey for retail and manufacturing, but 2013 is looking like a safer destination than 2012 for Australia's two-speed economic train.
The bumpy ride across the European debt winter and the unnervingly close view of the US 'fiscal cliff', may have slowed the Australian economy in 2012. But with a September quarter GDP kicking in at 3.1 percent year-on-year, Australia and its China- driven growth could be back on track in 2013.
As the Americans ride-roughshod into a brave new fiscal future and the seemingly ossified European leadership leaps from each crisis at the final moment, global share markets have been pointing to an improvement in economic fortunes here with Australia's ASX 200 up almost 10 per cent.
China's rebound has put the spark back into Australia's resources sector, but also thrown into stark relief the two-speed economy with mining out front and everyone else far behind.
The ghost of 2012 in Australia's economic engine - the sudden price weakness in Australia's key iron and coal exports seems to have been exorcised in 2013. The plunge in iron ore prices ($ US86.70 a ton in August, from 2011's peak of $US190) sucked the oxygen out of the sector and left Treasurer Wayne Swan in political limbo having spent much of Julia Gillard's capital on the broken promise of a fiscal surplus.
It also brought into question for a desperate few months much of Australia's critical iron ore expansion, seeming to confirm that a price under $US120 a tonne would snap costly Chinese miners to halt production, effectively putting a floor under the entire market.
As commodities fell away, confidence and jobs followed.
As a result, many companies have been laying off workers in Queensland and New South Wales, and shelving mines that had become unprofitable at the lower prices.New results from the Australian Bureau of Statistics (ABS) national survey of job vacancies reveal a slide of 8 percent in the past year, leaving unemployment back where it was at the start of the GFCBusiness confidence stuttered in June when BHP Billiton's delayed its $30 billion Olympic Dam expansion, but despite an outcry that the mining boom was over, the Chinese economy refused to buckle.
On the back of continued Chinese growth iron ore prices jumped 25 percent in December, making it the best monthly performance since 2008 while the most recent raft of economic indicators from China confirm a mild rebound taking hold in Q4 as policymakers suggested.
China's retail sales grew 14.9 percent year-on-year in November, ahead of the 14.6 percent forecast by Reuters. Andrew Forrest Chief Executive officer of Fortescue Metals Group Ltd (FMG) Australia's lowest-cost iron ore producer confirmed that Australia's resource economy can expect a consistent year. He told Xinhua, "In terms of their economic model, let's look no further than the record." "I would say that all signs of the turnaround in China are already with us. China was going into a period of quietness as its leadership changed I was predicting this twelve months ago - now, of course everyone's saying they were going into a period of economic quietness but the date speaks for itself."
Energy is expected to be a major beneficiary of the rebound. Forecast to grow by 15.9 percent to reach 44.4 billion Australian dollars in 2013, the oil and gas production industry has been highlighted by IBISWorld with growth driven by higher output and substantially higher global prices. IBISWorld General Manager ( Australia), Karen Dobie told Xinhua that Australia's liquefied natural gas production and exports are expected to increase significantly over the coming year. "This reflects a switch in favour of gas for electricity generation, which will be driven by more volatile demand and carbon pricing on oil, and an expected increase of 8.4 percent in US dollar crude oil prices." She said.
With abundant reserves in Queensland and New South Wales, LNG output is rapidly growing and is expected to reach 6.8 billion cubic metres in 2013. "Most of this production is expected to come from Queensland, where coal seam methane is already used in electricity generation, and where a number of export-oriented LNG plants are currently under construction", said Ms Dobie. "Strong growth in export demand for LNG is expected to increase world price by 15.7 percent over the next year," she added. There are also now up to 178 billion Australian dollars worth of LNG plants under construction highlighting the two-speed nature of Australia's economic train.
As China-driven resources capital ramps up, industries like tourism and retail are left behind. The strong Australian dollar - seen by economists like Dr Michael Wesley as a barometer for the health of the Chinese economy - has thwarted tourism and manufacturing while the prehistoric retail industry has only edged 2.9 percent higher over the year to October in seasonally adjusted terms.
Now with the US Federal Reserve literally pumping out over $ US80 billion a month to resuscitate the economy, the greenback grows weaker by the hour. Forecast to grow by 9.1 percent to reach almost 11.8 billion Australian dollars in 2013, the online shopping industry has all but crashed the retail recovery dream as Australian consumers demand more of their goods and services via the online realm in weaker currencies.
The death knell has already been sounded after the collapse last year of iconic Aussie brands from Darrell Lea, Allans Music, Payless Shoes, GAME and the fire-sale Dick Smith Electronics.
The threat is clear - online sales are growing at an estimated 26 per cent over the year to October, according to a National Australia Bank survey. Over the coming year, IBISWorld expects online retailers to move into the bricks-and-mortar space, providing convenient pick up and return locations for consumers.
"This phenomenon will lead to a greater increase in the convenience provided by online retail." Dobie said. Referring to the key Westpac-Melbourne Institute leading index of economic activity, released, Westpac chief economist Bill Evans believes Australia's economy will develop slowly in 2013, while still predicting a growth rate of 2.75 percent.
"While we are expecting a modest uplift in the contribution to growth from the consumer, housing and non-mining investment in response to the interest rate cuts we have seen through 2012 and the further cut we envisage in early 2013, growth is still likely to falter as the contribution to growth from the mining boom fades in 2013." He said.