Australia has had a difficult quarter. The global economic crisis has severely impacted the nation, while forest fires ravaged huge tracts of land.
The mining industry, one of Australia’s strongest sectors, was hit by the international economic crisis, too. In politics, Australia’s immigrants often made headlines. During the quarter, Australia launched a free trade agreement with Chile.
Immigrants and human rights
In 2009, Australia reported that it would deny the US request to accept Guantanamo detainees. President Obama requested help when he announced plans to close the prison in December 2008.
Paradoxically, the Human Rights Commission of the Australian Parliament released a report condemning the treatment of refugees. The report stated that asylum seekers lived in miserable conditions for extended periods. It categorized the majority of detention centers as prisons. Many have barbed wire, cramped conditions and tight security. The report was a blow to the Rudd Government, which was elected on a more-humane refugee policy in November 2007.
Australia decided to reduce the entry of skilled immigrants by 14%, in order to protect local jobs lost during the economic crisis. It was the first reduction of visas in 10 years, occurring, in part, due to rising unemployment.
Prime Minister Rudd rejected a proposal by Aboriginal leader, Professor Mick Dodson, to debate a change in Australia Day celebrations. The majority of Aborigines call it Invasion Day, since it commemorates the arrival of the British fleet in 1788. The fleet’s arrival was followed by a proclamation of sovereignty over the entire continent.
The government did, however, announce it would adopt the United Nations Declaration on the Rights of Indigenous Peoples. The action reverses the policy of the previous administration, which voted against the declaration when first adopted at the UN General Assembly in 2007. The move is an important step in reducing the gap between indigenous and non-indigenous Australians, according to the Minister for Indigenous Affairs, Jenny Macklin.
The spectre of recession
As noted, Australia’s economy has been hard hit by the global economic crisis. In early March, it announced that the Australian economy had contracted for the first time in eight years. In fact, it suffered a 0.5% drop in the GDP during the last quarter of 2008. Technically, the country is still not in recession, whereas that requires at least two quarters of negative growth. The economy grew by 0.3% during 2008.
The government announced a $26.5 billion stimulus plan against this backdrop of crisis. Over half of the money will be spent on schools, homes and roads. Nearly one third will provide cash to low-income families. The central bank also lowered interest rates to 3.25%, the lowest level in 45 years.
Meanwhile, the financial consequences of the disaster continue to be felt. The second largest investment bank in the country, Babcock & Brown, declared bankruptcy when it was unable to cope with its high levels of debt. The collapse came after over a year of battling to remain solvent.
One of the hardest hit areas was Western Australia, which was the former epicenter of mining development and the country’s economic boom. Large mining projects have been delayed, and thousands of jobs have been lost due to the severe drop in demand from key markets such as the Chinese. Despite this fact, unemployment in this area is only at 2.8%, the lowest national rate. The national average is 4.5%. Changes due to the crisis have been great.
Rio Tinto has agreed to accept $19.5 billion in investment by Chinalco. This means Chinalco has acquired majority stakes in several mines, one of which is the Chilean Escondida. Rio Tinto expects to reduce its debt to $8 billion via the measure.
BHP Billiton, the largest mining concern in the world, registered a 56.5% drop in second-half earnings for 2008. The biggest loss was recorded in its metals division, which fell by 103.3%, or $111 million. According to BHP, the drastic decline was due to mine closures and the loss of assets and costs associated with the Rio Tinto acquisition. However, BHP Billiton made another bid for Rio Tinto, to try to counterbalance Chinalco’s participation in it.
Australia rejected the purchase of Oz by the State-run China Minmetals. It cited national security concerns as the reason for rejecting the Chinese firm’s attempt to increase its participation in Oz Minerals, which is one of Australia’s key mines. It is also located near a weapons test area in the desert in the interior of the continent. Australia has stated that the agreement would be approved only if it excludes copper and gold mines.
Good news came in the form of a new FTA with Chile. 97% of goods traded between the two nations will be duty free.
Australia was hit by one of the worst fires in its history during February. During January the southwest zone of the country began experiencing the worst heat wave in decades, with temperatures above 43º C. This meant that there were several fires, electrical system failures and many deaths among the elderly.
Fires were frequent and grew in size. Victoria was hardest hit and officials suspect arson may be involved. The most disastrous fire hit Feb 7, when 181 people died, nearly 500 were injured, and about a thousand homes were destroyed on the 365,000 hectares of burnt land.
The government declared a national day of mourning for those who died. Thousands of Australians arrived in Melbourne to participate in the memorial service. Princess Anne attended on behalf of the queen.
However, new fires caused havoc during February in the state of Victoria. High temperatures and strong winds returned, alarming the local population. At the end of the month, temperatures fell, which helped firefighters control the situation. Once again, arson is a suspected cause of the disaster.