Australia is at a historic economic turning point. The mining boom is over. The price of Australia's two largest exports, iron ore and coal, has collapsed for structural reasons. The extraordinary transformation of China's economy, which has taken root over the past 18 months, is central among these. China, our largest trading partner, is shifting rapidly away from the old model of breakneck growth based on investment in resource-intensive heavy industries such as steel and cement production, and towards household consumption and investment in services and higher-value manufacturing.
China is also transforming its energy system. The government has imposed restrictions on coal use in key economic regions and is supporting a rapid shift to cleaner energy sources. In 2014, $US83 billion was invested in renewable energy generation capacity (excluding hydroelectricity) in China – about a third of the global total. This shift is motivated partly by acute public concern about air pollution, which kills more than a million Chinese people every year and burdens tens of millions more with ill health and toxic living conditions.
The remarkable outcome is that in 2014 China's coal use fell (after growing at more than 8 per cent a year between 2000 and 2013), and has fallen even more strongly in the first six months of 2015. Coal imports fell by about 38 per cent year-on-year in the first half of 2015.
This is China's "new normal". China's next five-year plan, scheduled to start in 2016, will accelerate these economic shifts: China's central bank estimates the country will spend at least $US320 billion in each of the next five years to meet the new plan's targets for cleaning up China's environment and expanding non-fossil-fuel energy.
The result of all this for Australia? Constantly rising Chinese demand for our resources has become a thing of the past, just as mining companies have invested heavily in expanding Australia's supply. And demand for low-carbon, energy-efficient, and environmentally friendly goods and services will grow, just as Australia's current government is systematically dismantling the policies and institutions designed to foster Australian growth industries in these areas.
Dramatic changes in energy systems are evident in many other countries too, and they are affecting technological possibilities and relative prices everywhere.
smh
