Australia Mining Slowdown Hitting Economy Never Down on Luck

Australia, known as the lucky country for its resource abundance and temperate climate, is about to find out how long its latest winning streak will last.

BHP Billiton Ltd. (BHP), the world’s biggest miner, last week mothballed projects valued at more than A$50 billion ($52 billion) by Credit Suisse Group AG and Deutsche Bank AG. At the same time, Australia’s resources minister called the end of a bull run in commodity prices, and the central bank chief predicted the cresting of the investment wave within two years.

The deceleration of the industry that helped secure 21 recession-free years heightens focus on the views of a minority seeing economic contraction in a nation where consumers took on more debt than Americans at the height of the mortgage bubble. While Bloomberg News surveys indicate growth exceeding 3 percent in 2013 and 2014, Deutsche Bank sees the danger of a recession.

“There is a view around Australia that says this is a different economy,” said Adam Boyton, chief economist for Australia at Deutsche Bank in Sydney, who previously worked at the nation’s Treasury. “My point is: was it skill or luck that drove iron ore and coking-coal prices higher from the Australian perspective,” he said. “It was more luck than skill.”

The windfall Australia gets from exports, called the terms of trade, will slump 15 percent in the final three months of 2012 from a year before, a magnitude that presaged a recession in three of the five times it’s happened in the past half century, according to Boyton. The central bank estimates the terms of trade reached a 140-year high last year.