China’s economic growth in the third quarter was 7.3%  compared with the same time last year — its worst since 2009 — amid a continued downturn in the property sector. Iron ore miners, beware.

The good news, although not for Australia right now, is that China’s leaders are attempting to rebalance the country’s economy away from housing, fixed-asset investment and heavy manufacturing. But the problem is that the domestic demand that was supposed to pick up the slack and provide the “re” part of the balance has failed to emerge. That has only been abetted by the key economic message from Chinese President Xi Jinping’s anti-corruption campaign: austerity, not consumption.

The latest figures from Australia’s largest trading partner and biggest export market show growth is down from 7.5% in the previous quarter. It’s a pace that has not been seen since the first quarter of 2009, when growth was 6.6% year-on-year as global trade collapsed in the wake of the financial crisis triggered by banking failures in the West.

The flow-on effects are already being felt in Australia with the unprecedented collapse in prices of our two largest exports — iron ore (by 40% this year so far) and coal (thermal coal prices have been sliced in half since 2011 and coking coal by more than two-thirds in the same period) — and there’s more pain to come there, especially with new tariffs on coal imposed by China last week and tough new rules on much of the dirty coal Australia exports due to be imposed from January 1.

The upshot of this is a little unclear but likely means slower sales and lower margins for coal miners already doing it tough. Junior iron ore players are bleeding cash; many will go under as big boys like BHP and Rio have signalled they will dig deeper, harder and faster as their means to winning back market share and the pricing power that comes with it in the longer term.

So it’s hard to justify the Pollyanna reaction of Australian financial markets to the news — both the Australian Securities Exchange and the Australian dollar posted modest gains yesterday. The news was only slightly “less bad” than expected and doubtless fudged by the Chinese government. (With the Communist Party’s top leaders in the midst of their annual Plenum in Beijing, worse-than-expected economic news was never going to happen this week).

There’s a hint of what’s coming next in China: while the government continues to quietly try and stimulate the economy a little, the housing market — which soaks up about 50% of China’s steel and therefore Australia’s iron ore — remains, to put it bluntly, in the toilet.

“But if the official figures … look bad, the key measures, to which Chinese Premier Li Keqiang has previously said he pays most attention, look decidedly worse.”

Data from the China Index Academy showed that land sales in 81 cities declined further in the first 20 days of October, dropping 70.4% year-on-year in value terms, and 86.6% year-on-year in volume terms, accelerating from falls of 57.9% and 49.3%, respectively, in September. The larger decline in volume terms was mainly owing to more second- and third-tier cities, where land prices are usually lower, recording zero transactions.

Back in 2009, problems for China were external. Now, apart from still sluggish export demand from Europe, they are pretty much home-grown. China is suffering from massive debt hangover from the stupendous multitrillion-dollar stimulus its government sprayed in every direction in response to the GFC. The country is also hindered by an economy that continues to misallocate capital, is far too reliant on state-owned enterprises, and a population that is beginning to age before the country has reached even middle-income status.

As its hedges its bets a little, the government has been pumping money into the banks and providing low-level stimulus, so some economists reckon that official figures may lift in the fourth quarter. But next year ain’t looking as good, with many economists predicting sub-7% growth.

But if the official figures — much derided by many economists — look bad, the key measures, to which Chinese Premier Li Keqiang has previously said he pays most attention, look decidedly worse. The so-called Keqiang Index consists of electricity consumption, rail freight and credit growth.

“Electricity consumption improved, up by 2.7% year on year in September after a 1.4% decline in August, but is still the second-lowest print in 18 months. Railway freight traffic fell further, down by 6.2% y-o-y after falling by 0.2% in August. New RMB loans rose more than expected, but outstanding loan growth slowed to 13.2% year on year from 13.3% in August,” analysts at investment bank Nomura said.

With that on the table, the forecasts from the Australian Treasury, which underpin the budget, are already starting to look a little loopy. Treasury’s global GDP growth figures for this year and the next two years are now consistently ahead of the latest forecasts from the World Bank — this year by 0.7% and next year by more than 0.5%. In a world where growth is only 3% to 3.5%, such differences — of up to 20% — are meaningful.

Treasury’s forecasting 7.25% growth for China next year after 7% for this year. Those now look a little high, but it’s the figures underneath these big picture estimates that look even more divergent from the emerging reality. Treasury has Australian metallurgical coal exports doubling over the next four years to 300 million tonnes, but the latest forecast from UBS expects these to top out at 175 million tonnes by 2017.

Likewise, Treasury’s long-term price for the coking coal of over $100 per tonne has already been breached, and it also appears to have underestimated the pace of the iron ore price collapse. Logic says that Treasury will have overestimated tax receipts and Australia’s terms of trade. That is a problem for the government.

The question is: can China prevent a harder landing? With the property market malaise set to continue well into next year — and possibly beyond — and little sign that domestic demand is about to come galloping to the rescue, it’s already looking bumpy.

For Australia, that’s an even bigger problem.