Australian could fall into a recession for the first time in 28 years if China stops buying Australian coal, a leading economist fears.
A plunge in Sydney and Melbourne house prices is already threatening economic growth and now the communist Asian superpower is threatening to stop spending $22billion a year on Australian coal.
China, which also spends $10billion a year sending international students to Australia, has hinted at a trade war in retaliation for Huawei being banned from installing the next-generation 5G mobile phone network and the National Broadband Network, over spying fears.
Australian could fall into a recession if China stops buying Australian coal (Gladstone port pictured) threatening $22billion worth of exports
It has expressed its displeasure by banning Australia coal from entering a the Dalian port in northern China, with the news continuing to send shock waves through financial markets on Friday.
China is Australia's biggest trading partner and a major buyer of coal from Queensland's Galilee Basin and the New South Wales Hunter Valley.
It bought a third of Australia's $66.4billion coal exports in 2018, with a Chinese boycott of Australian coal a $22billion threat to the economy.
The Australian dollar lost a percentage point on Friday, dropping down to 70.86 US cents, after Reuters revealed China's northern port of Dalian had banned imports of Australian coal.
China, which also spends $10billion a year sending international students to Australia, has hinted a trade war in retaliation at Huawei being banned from installing the 5G mobile network
Along with the ban, customs at Dalian will cap overall imports for 2019 through its harbours at 12 million tonnes, an official at Dalian Port Group told Reuters on Thursday.
The indefinite ban on imports from Australia, effective since the start of February, comes as major ports elsewhere in China prolong clearing times for Australian coal to at least 40 days.
AMP Capital chief economist Shane Oliver said a Chinese ban on Australian coal could have devastating consequences if house prices continued to plunge in Sydney and Melbourne and there was an international financial calamity.
'If there's a double whammy shock: suppose you have a housing slump and then a little way into that you get a slump in the global economy, or China hits our export earnings, then it would tip over into recession,' he told Daily Mail Australia on Friday.
