Strong exports have been one of the key pillars of Australia's economic growth over the past decade. In sheer volume, the amount of stuff we sell the world has grown by close to 60 per cent in that time, and average export prices are at an all-time high.
But that pillar of our growth stands on one country, and virtually one country alone.
Between 2008 and 2018, Australia's annual export revenue grew by $156 billion. But $99 billion of that came from a boom in exports to that country, and a further $9 billion from exports to its gateway.
The country was China, its gateway Hong Kong. Together they have generated an incredible 70 per cent of all Australia's export growth over the past decade - more than twice as much as the rest of the world put together.
Never in the postwar era has any country been so important to our economy. Exports to China and Hong Kong shot up by $108 billion in 10 years, while exports to the United States grew by just $5 billion (what a fizzer that free-trade agreement was!). We're often told that India could be our alternative to China, yet exports to India in the same decade grew by just $6 billion.
China's demand and our massive immigration program are what has kept the Australian economy growing. The reason conventional wisdom can claim Australia escaped a recession in 2008-09 is that China responded to the global financial crisis with a massive construction program, using Australian iron ore and coal.
There are echoes of those events in 2019. To prevent the Trump tariffs dragging China's economy down, president Xi Jinping has revved China's construction activity even higher, and once again Australian iron ore and metallurgical coal have been the big winners. Prices have soared and our terms of trade have jumped to a six-year high, helping to keep the economy growing and put the budget almost back in the black.
Australia has experienced export dependency before, but it's a long time since Britain bought half our exports. Even our dependence on Japan in the seventies and eighties was nothing like this. When two-thirds of our export growth relies on one country, we are seriously dependent on it to provide for our future. And that matters for three reasons.
First, it makes us highly vulnerable to Chinese economic pressure designed to secure political/diplomatic goals. We support the US freedom of navigation patrols in the South China Sea, for example, but we refuse to join them, for fear of Chinese retaliation. And when even Australia won't join the United States in these patrols, no Asian country dares do so.
Second, when China's economy falters - as one day it will, and possibly quite soon - it will take Australia down with it. China kept pursuing a pattern of growth that is very favourable to Australia's export mix. But it is unsustainable, and when it collapses it is likely to be succeeded by a long drought for those same exports.
Third, when the United States and China eventually end their trade war, part of the settlement will almost certainly see China ordering its importers to buy American goods in areas now dominated by Australian exports.
Some of our key exports are frighteningly dependent on China. Last year that country provided 81 per cent of export revenues for iron ore - now our biggest export earner. Together with Hong Kong, it bought 68 per cent of our gold, and by itself it provided 59 per cent of export revenues from confidential trade (usually alumina) and 79 per cent from miscellaneous minerals.
OK, if demand drops, minerals can be stockpiled indefinitely. But their prices will fall, and if demand drops steeply, Australian miners could suffer big falls in export volumes and prices alike. The very forces that have inflated our growth will work to deflate it, and that will hurt.
China has not only been buying minerals. It also buys the vast bulk of Australia's exported wool, barley, prawns and other crustaceans, woodchips, cotton and miscellaneous foods. Of Australia's key exports that have seen rapid growth in the past decade, all but one owe that growth to China.
Until recently, on its own figures at least, China was the world's fastest-growing economy. Australia has been fortunate to be able to swim alongside it, in a relationship that has worked for both countries.
Indeed, it has created dependence at both ends. As Angus Grigg and Angela Macdonald-Smith documented recently in the Financial Review, China now relies on Australia to supply three-quarters of its iron ore imports and almost half of its LNG.
So far, Australia has probably been the biggest beneficiary of the China-US trade war. Other Asian countries normally export lots of components to China to be assembled there for export. That trade has been severely hit, whereas Australia's China-bound exports soared by $28 billion, or 27 per cent, over the year to June. That rise is likely to be undone, one way or another, as the trade war comes to a crisis.
It certainly hasn't happened yet. The Chinese government's stimulus measures - such as ordering developers to build more new apartments on top of the 50 million empty ones already in China's cities - require plenty of steel, which in turn requires even higher imports of Australian iron ore and metallurgical coal. And its diversion of import demand from the United States - which had been its main source of LNG - has only made Australia more important.
But it won't last. Our gains will unwind when the trade war ends and Chinese demand is diverted from Australia to the United States. Demand for our iron ore and metallurgical coal will shrivel when China decides there's a limit to how many empty apartments it can build. And there are good reasons why China itself might want to stop producing more than half the world's steel and aluminium.
There are also good reasons why Australia should want to reduce its economic dependency on a superpower that in other ways has shown itself far from friendly to us.
But while our trade surpluses have grown very large, Australia's domestic economy is on the ropes. Almost half the jobs created this year have been part-time, and half of them have gone to people who want more work. The National Australia Bank's monthly business survey confirms that business confidence is low and heading lower.
The youngest generation of workers - those aged fifteen to twenty-four - are getting it in the neck. On the Bureau of Statistics's preferred trend measure, there are 2.225 million of them in the workforce, up 30,000 this year, yet the number in full-time work has grown by just one hundred. The number unemployed has grown by 13,000, while the number underemployed - mostly people who want full-time work but can only find part-time jobs - has swollen by 28,000.
The Bureau estimates 30 per cent of all workers in this age group are now "underutilised." What will happen to the rest of them if the pillar of China's support to our economy crumbles, and falls?
- Tim Colebatch, former economics editor of the Melbourne Age, is a regular contributor to Inside Story, where this article first appeared.