The September 2019 edition of the Resources and Energy Quarterly was released today by the Department of Industry, Innovation and Science.
The report shows that Australia’s resource and energy export earnings appear likely to hit a new record of $282 billion in 2019–20, despite volatile commodity markets. This is greater than the previous record of $279 billion set in 2018–19, and only a small downward revision on the June forecast.
The strong figures are primarily the result of higher export volumes and a lower than expected Australian dollar. Australia is also benefiting from being the world’s second largest gold producer at a time of trade tensions and lower economic confidence. Earnings from gold — seen by many as a reliable store of value in times of global economic uncertainty — are set to surge by one third to $25 billion in 2019–20.
Australia’s other major resource and energy commodities continue to drive high earnings. Iron ore prices have come off recent highs but earnings are still set to increase to $81 billion in 2019–20. LNG export earnings are also forecast to lift to $52 billion this financial year, driven by growing export volumes. Metallurgical and thermal coal are also expected to remain high, while aluminium should benefit from Chinese stimulus measures.
Meanwhile nickel is set to jump in the rankings of significant export earners, as a direct result of technological investment in electric vehicles and energy storage. Australia’s total nickel export earnings are forecast to increase from $3.6 billion in 2018–19 to $5.6 billion in 2020–21.
Nonetheless, weakening commodity prices have shaved $3 billion off the June forecast in 2018–19. It is expected export earnings will fall to $258 billion in 2020–21, down from the $261 billion forecast in the June 2019 Resources and Energy Quarterly. This is due to a rising exchange rate, slowing industrial production, and the steady return of Brazilian iron ore production to normal after supply disruptions.
The outlook for the world economy remains uncertain. Global cutbacks in manufacturing production are already flowing through into commodity markets and the outlook for world industrial production has deteriorated.
However, there are some positive signs for the future. For the first time in six years, mining companies in Australia are planning to increase their annual spend on investment. Metal ores and coal mining are driving the higher investment, encouraged by the higher commodity prices of the past two years.
This edition of the Resources and Energy Quarterly includes a special topic on mining productivity. Our research suggests that productivity in major parts of the Australian mining sector may be stronger than traditional measures suggest. In globally uncertain times, the factors under our control — such as productivity — become increasingly important.
For more information and to access the report, visit Resources and Energy Quarterly.