Case | HBS Case Collection | June 2009 (Revised May 2013)

Australia: The Riches and Challenges of Commodities

by Laura Alfaro and Renee Kim

Abstract

Australia's Prime Minister Kevin Rudd faced a daunting task that he never imagined he would have to face when he was elected two years ago. Australia at that time was poised to enter its 17th year of uninterrupted growth. Commodity exports were booming, largely driven by China's insatiable appetite for raw materials. Then the global financial crisis erupted in 2008, brewing challenges for the world's biggest exporter of coal and iron ore. Prime Minister Rudd pushed for massive stimulus packages to revive domestic consumption and demand. Yet as an economy heavily dependent on trade, tumbling commodity prices brewed difficult times for Australia's trade deficit and its persistent large current account deficit. What was in hold for Australia's deficit, which had been in the red all but four years since 1950? In addition, how should policymakers address the intense concerns regarding China's growing interest in Australia's prized natural resources sector?

Keywords: Financial Crisis; Trade; Foreign Direct Investment; Policy; Crisis Management; China; Australia;

Citation:

Alfaro, Laura, and Renee Kim. "Australia: The Riches and Challenges of Commodities." Harvard Business School Case 709-007, June 2009. (Revised May 2013.)