Sigh. The moment has come to call a spade a spade. The Chinese property bust is smashing iron ore. Thermal and coking coal are still falling and/or catching up to past falls in contract prices:
Gold and oil/LNG are also down sharply in the past few months. In short, Australia’s terms of trade (ToT) are getting smashed to the extent that it’s rapidly assuming the proportions of an external shock, especially since the Australian dollar has totally detached itself from the economy.
I can only estimate the ToT falls in train but can say with confidence that they are much bigger than forecast by Treasury or the RBA. Here is my best guess of what’s coming down the pipe in the next three quarters: