Resource export earnings set to soften

Australian resources and energy export earnings are set to drop by about $150 billion from the extraordinary surge of 2022–23 according to a five-year outlook released today. The March 2024 Resources and Energy Quarterly shows commodity export earnings are expected to hit $417 billion in 2023–24, or about 10 per cent below the record $466 billion achieved in 2022–23. Ongoing falls in bulk commodity prices are expected to bring earnings down further — to about $300 billion in real terms by 2028–29. The fall is because of lower world prices, with Australian export volumes to remain steady over the outlook period. Released by the Office of the Chief Economist, the quarterly report indicates global economic growth has softened over the past year, in response to the restrictive monetary policy stance of many central banks as they sought to bring inflation down. With monetary policy likely to become less restrictive, global manufacturing has better prospects to pick up, which could provide an upside to commodity demand. Highlights from the March REQ are: Iron ore remains Australia’s top resources export, expected to earn $136 billion in 2023-24, up from $124 billion in 2022–23. Earnings are forecast to ease to $111 billion in 2024-25 and fall to around $83 billion by 2028–29. The prices of gas and coal are expected to continue declining as global markets adjust to the aftermath of the Russian invasion of Ukraine. Earnings from metallurgical coal are expected to be $56 billion in 2023–24. This is down from last year’s $62 billion, and expected to ease further over the outlook period. Thermal coal earnings are forecast at $36 billion in 2023–24, down from $66 billion last year, before easing further over the outlook period. The global energy transition is likely to sustain the demand for resource commodities used in low-emissions technologies including iron ore, aluminium, copper, nickel and lithium. However, the prices of nickel and lithium have dropped to five-year lows as market surpluses increased. India is expected to account for a significantly larger share of world commodity demand by the end of the outlook period. Risks to the forecast include a widening of Western nations’ sanctions on Russia to include base metals. This would have significant implications for Australian producers of nickel and aluminium. Any further widening in the Gaza conflict could disrupt Middle East oil and LNG supply and raise prices, hurting world economic growth. The report notes that the El Niño climate episode appears set to end by mid-2024, with a higher-than-normal chance of a La Niña episode developing in the second half of 2024. This risks a return of the wet weather and flooding which heavily impacted mines, transport routes and ports in Australia in the 2021-23 period.

Resource export earnings set to soften

Industry Queensland

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