As he prepares to release the Mid-Year Economic and Fiscal Outlook, Australian Treasurer Joe Hockey — May budget still not passed — could not have had worse news yesterday. He might, in fact, have felt queasy.

China’s latest trade figures laid bare the truth about the stuttering economy of Australia’s biggest trade partner and, more importantly, the biggest single destination for the rocks in the ground that have sustained our economy for a staggering 23 years without a technical recession.

Iron ore imports, despite trading at prices not seen since the depths of the global financial crisis, fell a whopping 15.1% in November compared to October and 13.4% compared with last November.

Crucially for Hockey — and the iron ore miners that ring in his corporate tax tills — this is precisely the time of year when Chinese steel mills are supposed to “re-stock” their supplies of iron ore, sending the price of Australia’s most valuable export upwards.

Analysts at ANZ, the only Australian bank that has a significant presence across Asia, are predicting the rout will continue this month. ANZ analysts said:

“There were no signs of opportunistic buying, despite prices falling to over five-year lows close to US$70/tonne. This implies domestic demand slowed, likely due to government cuts of about 100 million tonnes of steel-making capacity during the APEC summit. Looking  ahead, December imports could fall again.”

But wait, there’s more:

“After the successful cut in emissions following forced steel mill closures, new environmental rules that will come into force on 1 January 2015 could slow steel production in China’s north-east region and exacerbate the seasonally slow winter demand.”

The combination of massive oversupply by mainly Australian iron ore miners and a softening of demand by Chinese steel mills, driven by the collapsing demand for and price of steel as the Chinese economy spirals downwards, has slashed the price of iron ore by close to 50% this year.

The salad days are over. Gone. Done.

And the much-touted Chinese domestic demand that was going to ride in to save the day, picking up the slack for state-directed investment and the outrageously corruption-driven property boom, is nowhere to be seen. Even if the demand were there, which it isn’t, years’ worth of apartments are sitting around waiting to be bought or built in parts of China people wouldn’t send their parents-in-law to live in.  And when property prices and sales fall, property owners stop spending as their assets lose value, banks stop lending, and discretionary spending slows further.

The equations are basic and the dots easy to join. Despite this, there are some very bright people who have insisted that China, by dint of its size, can defy the laws of gravity. It can’t, and it isn’t.

As former premier Wen Jiabao warned for almost a decade, China’s economy has been “unsustainable, unco-ordinated, unbalanced, and unstable”. So it’s going to take more than a few quarters of fresh “economic reform”, much touted but so far little enacted by Chinese authorities fighting on far too many fronts at once.

The ever-deteriorating news from China came only days after Trade and Investment Minister Andrew Robb painted a rosy — or rather rose-coloured — picture of the current state of affairs. There was, Robb noted, “a surge” in resource and manufacturing exports. That may well be true, but the prices for Australia’s major exports have been, to put it politely, smashed.

Robb’s release contained the hidden gem that exports to China actually fell by 5.3% — that in itself could be a new record. Even the most resolutely optimistic of the China boosters, Australia’s iron ore miners, have had to pull their heads in in recent weeks amid mounting carnage among junior miners as their share prices lost 80% or more in value in just 11 months.

When miners are cutting directors and retiring off the hangers-on to save on fees (as plenty have these past few weeks), it’s the clearest sign of all that the going is getting tough. Real jobs have followed, mines are being closed, and assets are being quietly — and not so quietly — put on the block. And it’s only just begun.

Fortescue Metals Group , the world’s largest pure play iron ore miner, is the litmus test: with costs lower than the juniors and higher than BHP Billiton and Rio Tinto — and more debt than a normal company could bear in the medium term — it’s feeling the strain. In recent weeks FMG has cut three long-time directors, including former chairman Herb Elliott and former MD Graeme Rowley, hacked back capital spending and “restructured” senior management. Job cuts are in the wind, and soon it will turn once again to creative asset sales to help pay down emergency loans that were inked last time the price went down, two years ago. But this time there will be no respite, and FMG chief executive Nev Power, who has done a mighty but as yet unfinished job of balance sheet repair, will be earning every cent of his pay.

It was Bluescope chief executive Paul O’Malley who bravely broke ranks with Australia’s Sinophilic blue chips last month to bell the cat on Chinese domestic demand.

“What we’re seeing on the ground is a significant reduction in confidence domestically within China as it pertains to building and construction, which is where a lot of steel goes,” O’Malley said in October. “Yes, there is still growth, but the heyday is over. It may well return, but at the moment the heyday is over.”

O’Malley would know; his company actually sells steel in China, not just its ingredients (about 100 million tonnes of which now lie under desultory tarpaulins, alongside Chinese docks).

Those Pollyannas who have been in denial about Australia’s dependence on mining and China, the shaky state of the Chinese economy and its construction market should wake up and smell the coffee.

Fasten your seatbelt, Joe — it’s gonna be a long and bumpy ride.