Global Recession Hits Australian Export Business

The slowdown in world demand has forced companies such as BHP Billion, LTD and Rio Tinto Group to fire workers, cut capital expenditure and pare back output. This comes as Australia had been enjoying a 17-year economic expansion.

BHP Billiton agreed to a 58 percent cut in annual coking coal contract prices after demand for the steelmaking material fell, according to a company statement last month.

"Changes in annual contracts and pricing arrangements are expected to flow through to export prices over a number of months," Australia's central bank said in a report this week.

Rio Tinto agreed to a cut in contract prices with steelmakers this year. BHP Bilton has yet to announce any agreed contract prices.

A recovery in global demand would help boost Australia's largest export markets. Reports this week showed a boost in business confidence, manufacturing and factory production in Australia's largest export markets.

"We are seeing better economic numbers out of our major trading partners and that's good news for exports," said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. "That will help mitigate the decline in export prices."

In addition, there has been an increase in interest in coal from China. Australia has historically never sold coal to China.

Australia avoided a technical recession earlier this year tanks to government stimulus and interest rate cuts sparked consumer spending.