Australia’s resource and energy export earnings are set to hit a record high in the 2017/18 financial year, before declining towards 2020.
This chart form the Australian government’s Office of the Chief Economist (OCE) tells the story:
It’s from the OCE’s Resources & Energy Quarterly for March 2018, which provides an update every three months on the state of Australia’s commodity sector.
“Australia’s resources and energy export earnings are forecast to reach $230 billion in 2017–18 — the highest level on record, driven primarily by a rise in the value of Australia’s energy commodity exports,” the OCE said.
“LNG is expected to make the largest contribution to growth in overall export earnings in 2017–18, driven by both higher export volumes and higher prices.”
The value of Australia’s commodity exports is then forecast to drop slightly, falling back to $216 billion by 2019/20.
“The main driver is expected to be a decline in the iron price, as new low-cost supply enters the market and demand growth moderates — a result of declining steel production in China.”
The OCE forecasts iron ore prices to fall from the their current level above $US60 a tonne, bottoming out at $US49 a tonne in 2020 before increasing slightly as global supply slows.
For now, research from Commonwealth Bank shows Chinese demand for Australian iron ore remains as strong as ever, with shipments from Port Hedland setting a new record in March.
In dollar terms, Australia’s total iron ore exports in the 2017/18 financial year are forecast to be around $65 billion:
Strong commodity prices have also helped to boost Australia’s trade surplus in recent months, with another strong result in February — the ninth surplus in the last 10 months.
The production phase of the mining boom has been defined by rapid growth in production and export volumes — a legacy which should last for decades to come, the OCE said.
“By the turn of this decade, however, the ramp up in Australia’s exports is expected to have largely run its course, marking the end of an extraordinary era for our resources and energy sector.”