With iron ore prices falling sharply to be down about 15 per cent so far in 2014 in US dollar terms, it is good news for the Australian economy that export volumes are so very strong.
A glance at this chart from the RBA Chart Pack show how the volume of iron ore exports has risen over the past decade.
Export receipts from iron ore are booming even with the lower price, simply because of the volume growth.
Of course it would be wonderful for the Australian economy to maintain sky high prices for iron ore while export volumes were booming. But it is unlikely that that that would ever be the case for any extended period of time. Good old economics is working with higher supply (and exports) being a factor contributing to the fall, regardless of demand from China.
Which of course is where a lot of the current focus is. Just how strong is the Chinese economy and with it, on-going demand for commodities?
Well, the Chinese authorities are aiming for 7.5 per cent GDP growth this year, a pace that seems strong enough to maintain demand.
There is nothing to fear from the falling iron ore price, at this stage, for the future of the economy while ever the growth in the volume of exports exceed the price fall. My guess is a fall below US$90 a tonne without any AUD depreciation would be a worry or if we were to see export volumes drop, it would be all bets off.
For now, watch the iron ore export volumes surge and look at the iron ore price with secondary interest.