Aaron Morey CCI WA
Aaron Morey from CCI WA. Image Supplied.
  • Australia supplies 56% of global iron ore, China demands 78% of it
  • China's growth in floor space has slowed, but is still positive
  • Households saved during the pandemic, and are now spending
  • Interest rates will continue to remain very low

The economic fundamentals in Australia are “strong” and we should be “optimistic”, so says the Chief Economist of CCI WA Aaron Morey.

Speaking at the annual API-REIWA property breakfast this morning, he delivered a positive view of the national and state economy.

“Australia has 56% of the global supply of iron ore,” said Morey, “and China demands 78% of the global supply.”

As long as China keeps building, they will keep requiring our iron ore. Although they are not building new floor space in quite same pace they were ten or fifteen years ago, building is still happening. Plus, the Chinese economy grew during 2020, by 3%, whereas most of the rest of the developed world saw recessions and between 3% and 10% economic downturns.

With the reductions in supply from Brazil due to Covid restrictions, so the world has turned to Australia to ship as much of the ore as possible.

Meanwhile, iron ore prices have risen to US$160/tonne today, from around US$40/tonne five years ago.

“The issue for WA though is that 43% of its economy is mining,” said Morey. “You have to go to the financial sector in NSW to find the next most reliant industry sector for a state in Australia, at 12%.”

Three factors underpin the relative strength of the national economy, according to Morey:

  1. The resources industry
  2. The Federal government stimulus
  3. The ability to control the virus

With the resources industry showing continued strength, as long as we can keep the virus at bay as vaccinations happen, Australia should be able to handle the ending of the federal stimulus packages in a few months time, Morey argued.

Another important element is that, unlike the previous downturn around the time of the global financial crisis (GFC) where Australians dipped into their savings, this time they have generally stashed away money (at about twice the usual rate.)

With interest rates set to stay very low for the time being, and arrears on mortgages actually falling, households are starting to spend, further assisting the recovery. Retail spending rose 15% last year – during a pandemic – which was not expected.

Indeed, a recent survey showed that there is more concern over skill shortages than a sudden outbreak of the virus.


You May Also Like

Melbourne property market sees mom and dad builders flock to outer suburbs for the best bang for buck

The cost of building a house in these top 20 suburbs started at $272,944 and topped out at $387,688.

Australian rental market clocks in a near-40% price growth, while wages struggle to keep up

Rents soared by almost 40% across the pandemic, while wages barely clocked in 20% growth.

Gender gap closes? Women outpace men in overall property ownership

Challenges persist for younger women in achieving homeownership, highlighting the need for targeted solutions.

Exclusive: Top five regional New South Wales housing markets revealed, the affordable alternatives to Sydney

Hotspotting has exclusively revealed to TPT New South Wales housing market’s five best regional hotspots for homebuyers and investors.

Top Articles

PropertyGuru Asia Property Awards (Australia) returns for its 7th edition, including several brand new award ...

This year's awards include several brand new categories, with entries closing 2 August 2024.

Housing crisis survival guide: How to buy your first Australian property

Three property experts give the low down on how to nab a home in this tough housing market.

Strata properties as investments: All you need to know about investing in a Perth unit

As the cost of renting approaches the cost of a mortgage, more people are investing in units to escape the rental trap.