CANBERRA: Gold rush in the late 19th century so enriched Charters Towers, an outback town in the state of Queensland, that it opened its own stock exchange. Trading ceased long ago. But the grand building still stands, its barrel-vaulted portico supported by eight slim pillars. Over a century later, Queensland is reeling from the demise of another mining boom. “There was a perception it would go on forever,” says Liz Schmidt, mayor of Charters Towers. But unlike so many other booms, this one has not ended in a national bust. Australia’s multi-pillared economy is still standing.
Given the violence of the commodity cycle, Australia’s resilience is remarkable. At its height, mining investment accounted for 9 per cent of GDP. As the economy scrambled to meet China’s demand for iron ore and coal, Australia’s terms of trade spiked. The price of its exports, relative to its imports, reached the highest level since the gold rushes of the 1850s, according to Philip Lowe, governor of the Reserve Bank of Australia, the central bank. Like those 19th-century scrambles, the China “rush” brought sudden prosperity to far-flung places. Townsville, a coastal city in north Queensland, hosted thousands of fly-in-fly-out workers (or “fifos”), who served the Bowen Basin’s coal mines and Mt Isa’s copper and zinc mines. Their six-figure salaries boosted the local economy and inflated the housing market, which attracted speculative investors from faraway Sydney, Melbourne and Brisbane. “There was so much money around,” says Peter Wheeler, a Townsville estate agent.
Similar booms elsewhere have ended in horrible busts. The turn in the commodity cycle helped condemn Brazil and Russia to brutal recessions. In China a sharp downturn in mining and metals prompted fears of a hard landing that still linger. Many argue that economic rebalancing and steady economic growth are incompatible goals. That worry also gnawed at Australia. As commodity prices started falling, mining companies stopped investing in big projects. Fewer fifos landed in places like Townsville, depressing local spending and employment. Townsville’s house prices fell and its unemployment rate rose above 11 per cent, almost double the national figure.
South of Townsville, around Gladstone, about 30,000 workers once had jobs building the state’s liquefied natural gas (LNG) industry; last year, the industry employed just 5,000. Similar stories can be found on the other side of the country. In Western Australia, where iron ore is a mainstay, the sinking economy appears to be pulling down the conservative government. It is likely to lose a state election on March 11th.
