Australia’s resource and energy export earnings are weathering the challenges of the global health pandemic, with forecasts remaining relatively strong over the next two years following a record $290 billion in 2019–20.
The September 2020 edition of the the Australian Government’s Resources and Energy Quarterly report, released quarterly by the Department of Industry, Innovation and Science, shows earnings will recede back to $256 billion in 2020–21 following the record spike, and then fall to $252 billion in 2021–22.
This represents a downward revision of $7bn and $3bn, respectively, from the June quarter estimate.
The June 2020 edition pointed out that unlike downturns in previous decades, the pressures of COVID-19 in output of the world’s industrial sector — the main consumer of energy and resource commodities — has indeed been sharp but relatively short.
“Probably the most notable development since the last REQ has been the sharp rebound in the Chinese economy — the world’s biggest consumer of resource and energy commodities,” the report’s foreword states.
“The rebound is the result of the almost complete eradication of COVID-19 in China, the subsequent easing of containment measures, and policy efforts to offset the impacts of the global COVID-19 pandemic.”
Looking forward, the report highlights resource and energy commodity exports are likely to remain a major source of support to the Australian economy as it recovers from the largest global contraction since World War II.
Iron ore earnings remain extremely high, and after setting an all-time record in 2019–20, are forecast to be $97 billion in 2020–21
Gold has lifted even higher since the last report, and export earnings are on track to set a new record (of about $31 billion) in 2020–21, making it Australia’s third largest commodity export behind iron ore and LNG.
Base metals have recovered further, and the prices of copper and nickel are now back to pre-COVID-19 levels. Both have relatively constrained long term supply prospects against a backdrop of healthy demand, especially for use in new age technologies.
The report states the prices of energy commodities are steadily recovering, as global demand recovers and supply cuts cause markets to tighten.
“Resource and energy exports are therefore expected to continue to make an important contribution to the Australian economy during the outlook period,” the report highlights.
“The forecasts have notable risks on both sides: on the downside, a COVID-19-induced, protracted economic slump in the US would hurt Asia (and thus Australia) as its major supplier of manufactures. An upside risk is potential for a successful COVID-19 vaccine and/or treatment that would boost business and consumer confidence, and lift economic activity once a sufficient number of vulnerable people have been inoculated.”
After resources exports hit a record $290bn last financial year — with iron ore topping $100bn for the first time — Canberra is now expecting values to fall to $256bn in 2020-21 and $252bn the following financial year. This represents a downward revision of $7bn and $3bn, respectively, from the June quarter estimate.
Minister for Resources, Water and Northern Australia Keith Pitt said that although down on last year’s record, the forecast figures are impressive.
“The $256 billion in exports for 2020-21 is the third highest export result on record and $252 billion for 2021-22 is the fourth highest result,” Minister Pitt said.
”These figures demonstrate the resilience of Australia’s mining sector in the face of unprecedented challenges from the pandemic and its ongoing importance to the country.
“The resources sector has underpinned Australia’s economy throughout 2020 and will continue to play a crucial role for the nation as the global economy recovers from the COVID-19 pandemic.
“Robust commodity earnings will be more important than ever to the Australian economy as the country emerges from the largest global contraction since the 1930s.
“Australia’s reputation as a reliable, low-cost supplier of mineral and energy products remains intact, with virtually no operational COVID-19 shutdowns, unlike some of our competitors.”
