Australia’s resources and energy export earnings reached an estimated $275 billion in 2018–19, according to the latest edition of the Resources and Energy Quarterly report.
Released by the Department of Industry, Innovation and Science yesterday, the report contains the Office of the Chief Economist’s forecasts for the value, volume and price of Australia’s major resources and energy commodity exports.
It outlines export earnings reached a record level in 2018-19, with forecasts indicating it is increasingly likely they will notch another all-time high in 2019–20 at $285 billion.
The department’s chief economist, Mark Cully, said the swing factor was iron ore prices.
“The fallout from the Brumadinho tailings dam collapse has led to a sharp drop in Brazilian iron ore exports, and this shortfall now looks set to last at least two years,” he said.
Extra Australian output will partly fill the gap, as mining expands and disruptive weather in Western Australia recedes, with the weaker Australian dollar outlook also pushing up the 2019–20 forecast.
According to Mr Cully, Australia’s 4th largest export commodity — thermal coal – is partially offsetting the spike in iron ore.
“(Thermal coal) is facing a tougher climate, with prices deteriorating in recent months,” he said.
“As a large producer and importer of thermal coal, China’s import policies, including extended customs clearance times, have added uncertainty into the market.”
Mr Cully also warned the forecasts were not without risks — the most notable being the worsening of trade tensions between the US and its major trading partners, particularly China.
“As we publish, the US and China are set for further trade discussions at the G20 meeting in Japan,” he said.
“Commodities helped to protect Australia from larger fallout during the Global Financial Crisis.
“However, the opposite could happen in a downturn sparked by trade disputes. Trade disruptions will hit global manufacturers especially hard, and the impacts will inevitably flow on to the commodity producers who provide the raw materials to manufacturers. This could result in an outsized impact on nations with a high commodity exposure.”
The report also puts the spotlight on the Australian gold industry and the uranium market.
Gold is forecast to overtake thermal coal as our fourth largest export in 2019–20 and uranium is currently emerging from a sharp downturn after the power plant disaster at Fukushima.
“Uranium’s long term prospects depend on a range of factors, such as climate change pressures, technological change, and the decisions of about 30 nations examining nuclear energy programs,” Mr Cully said.
AMMA buoyed by record earnings, calls for action to sustain growth
Responding to the figures, Australian Resources and Energy Group AMMA said the record values highlight the opportunity for the Morrison Government to implement policies of its National Resources Statement and help stimulate further industry growth.
Released in February, the National Resources Statement was built from recommendations of the government’s Resources 2030 Taskforce, and contains a number of policy initiatives to continue developing Australia’s world-leading industry and support its ongoing global competitiveness.
“Employers are buoyed by the Office of the Chief Economist’s estimate that Australia’s resources and energy export earnings reached $275 billion in 2018–19,” AMMA Head of Policy and Public Affairs Tom Reid said.
“This record surge of more than 20 per cent shows Australia is now reaping the benefits of the huge levels of investment in major resources and energy projects over the past 15 years.
“It’s also another reminder of how significantly the resources and energy industry contributes to Australia’s economic well-being and living standards.
“To underpin further industry growth and even greater national contribution, it is critical that industry and government work together on implementing the National Resources Statement during this term of Parliament.”
According to the latest Resources and Energy Quarterly report, export earnings surpassed the previous record of $227 billion in 2017-18, with a further spike likely to lift export earnings to $285 billion in 2019–20.
However the report also warned of potential global economic headwinds, including weaker commodity prices, trade tensions and slowing production.
“Australia has little time to waste basking in the success of our resources earnings – we must focus on keeping up the momentum started by the Resources 2030 Taskforce,” Mr Reid said.
“In particular, resources and energy employers are facing a number of future skills and labour mobility challenges that can be at least partially addressed by government and industry collaboration.
“Further critical strategies include supporting industry through its technology and ‘big data’ transformation, unlocking new resources-rich regions through investing in productive infrastructure, and helping industry strengthen its ties and contribution to regional Australia.”
Australian ore key to global infrastructure
Minister for Resources and Northern Australia Matt Canavan highlighted coal exports remained strong but iron ore was surging and gas had fired up too.
“It is estimated that in the 2018-19 financial year, exports of iron ore have totalled $75.2 billion, coal $67.6 billion and LNG $49.7 billion.”
“Australia produces more than half of the world’s iron ore and every year exports enough to build 10,000 Sydney Harbour Bridges.
“Steel produced from Australian ore is building the new wave of global infrastructure, with around half being used for construction, and much of the rest for machinery and motor vehicles.
“Overall, our resources and energy exports are providing the energy and infrastructure that helps to bring prosperity to hundreds of millions of people in emerging economies around the world”.