Amid back-slapping last week as Australia’s relatively buoyant 0.9% GDP growth figures were greeted with a traditional “she’ll be right”, the growing dark clouds gathering over the economies of Asia, led by China, were largely ignored.

Those signs, and there are plenty, should be giving Australia’s Treasurer Scott Morrison and his Treasury secretary John Fraser — still both very much on their training wheels — sleepless nights as they prepare the Mid Year Economic and Fiscal Outlook.

At the start of the year prognostications by the majority of economists — paid very large salaries to predict the Chinese economy — were that it would begin to show some life in the second half of this year. This has emphatically failed to materialise. And it’s getting worse, not better, for the country to which Australia sends about one-third of its exports.

On December 1 China’s official purchasing managers’ index, which measures manufacturing activity, posted its lowest result in three years.

Chinese manufacturing is continuing to retract as businesses seek cheaper labour markets and the economies of major export destinations in Europe and north Asia cool and contract. The developing markets that were helping the US prop up the global economy are suddenly very shaky. Commodity-rich Brazil is in recession, and Russia’s fortunes rise and fall with the price of oil — which has settled around US$40 per barrel at the present after the OPEC cartel agreed to keep pumping.

China’s property market, which in the past decade has used 40%-50% of the country’s steel, remains very much on the skids.

The stark evidence for Australia is that the price of its two major exports, iron ore and coal, are plunging. On Friday iron closed below the psychological US$40 per tonne barrier at US$39.40 per tonne, capping off a week where it lost 6%. Iron ore is down 58% in the past 12 months.

As Gina, Queen of the Desert — as the Financial Times so amusingly cast her this week (go on, close your eyes and imagine a Gina/Terence Stamp-in-drag mash-up) — starts shipping ore from her Hope Downs mine, her bankers, who have taken all the risk, will be sweating buckets. With plenty of supply still to come on line in Brazil there are plenty talking US$30 per tonne, and even lower.

Down the rail track at the Pilbara — not the same rail track, mind you, as Australia’s hopeless competition watchdogs are yet to force anyone in the big iron oligopoly (which at least for the time being includes Fortescue Metals Group) to share infrastructure  — FMG and its bankers will be sweating bigger buckets.

Rinehart’s ore is better quality than her arch rival Andrew Forrest’s is, and their relative places on the cost curve will likely determine their fates. Most analysts believe that under US$40 per tonne, FMG is not turning a buck; although it’s out of the debt woods for now, a sustained iron ore price in the $30 range would put the company back into trouble.

The ebbing China tide is beaching all ships in the Asian economies that are increasingly interlinked with the regional “powerhouse”. GDP growth is falling across south-east Asia. Japan has slipped back into its typical torpor, which has also gripped South Korea and Taiwan.

The economic downturn across Asia is not just affecting Australia’s exports — it could also, perhaps critically, affect investment.

The US aside, most of the money that has been pouring into Australia in recent years has come from, China, Japan and south-east Asia. As company profits in these places fall across the board — along with Australian-owned mining companies and banks that dominate our sharemarket — investment contracts. Ill-thought-out signals to international markets, such as that sent by Morrison about agricultural investment recently, when China was knocked back on a cattle station, only give already wary investors even more pause for thought.

How Morrison deals with all this will determine whether he can rescue a political career that has been going south with uncommon alacrity since he stepped up as Treasurer. As Crikey has noted regularly, he has a revenue problem that the evidence above says is getting worse.

Conspiracy theorists have suggested that a Machiavellian Turnbull was happy to take Morrison, hardly a fellow traveller, as his numbers man — knowing the task before whoever replaced Joe Hockey was perhaps politically beyond anyone — and would waste the greedy hands that seized the job, thus saving the nation any prospect of Prime Minister Morrison.

There are all sort of political considerations now in play for the government — one being an election before the budget. If that’s the case, perhaps a dose of medicine around the MYEFO can be avoided –but it shouldn’t, because the cold, hard facts for this exports-driven, capital-importing economy are that the patient is a lot sicker than it looks.