Australia has been hit by a phenomenon not seen there for nearly 30 years: recession.
The pandemic is to blame but fraying relations with China threaten to make the downturn considerably worse. This week, Australia warned against travel to Hong Kong and suspended its extradition treaty with the territory, sparking a swift rebuke from China.
Bumper sales of iron ore and coal had pushed Australian exports to its biggest trading partner to a record A$150.5bn (US$105bn) a year by May. Yet beyond mining, geopolitical tensions are casting a shadow across Australian businesses, from banks and agricultural operators to housebuilders and airlines.
Canberra’s travel warning, made in response to a new national security law that China has imposed on Hong Kong, is only the latest salvo in a growing row between the two countries.
In May, China imposed an 80 per cent tariff on barley imports from Australia, hurting the country’s farmers — a politically important group — and banned beef imported from four of the country’s abattoirs.
The measures were taken after Australia called for an inquiry into the origins of Covid-19. Chinese authorities have also taken aim at Australia’s tourism, education and wine sectors in a series of blistering statements and are expected to promote domestic coal at the expense of Australian exports.