It is tempting to take the view that Australia’s mining giants have miraculously been spared any discomfort from the slump in the
But it would be a mistake to believe that we no longer need to fret about the possibility of a steep fall in our export earnings.Because it is clear that China’s strong demand for steel and iron ore at present reflects the fact that many cash-strapped property developers are racing to finish their partly completed building projects, so that they can sell apartments, and use the proceeds to pay down debt.
Of course, not all developers can access sufficient funding to finish all their part-finished projects. Because of this, many cash-starved developers are being forced to sell off partly finished projects to stronger rivals, which are usually state-owned.
That is because developers are now aiming to conserve cash, and so are unwilling to commit to new projects.This has meant land sales have fallen sharply, as have new construction starts. The drop in land sales has been especially punishing for local governments, which are heavily dependent on the revenue raised from selling off land.