Resources and energy export earnings ease due to slower world growth

Following the $455b export high in FY23, earnings from Australia’s resources and energy sectors are set to normalise, according to the September 2024 Resources and Energy Quarterly (REQ).

Released by the Federal Department of Industry, Science and Resources, the REQ forecasts export earnings to ease to $372b in FY25, down from $415b recorded in FY24, as a result of weaker global prices, slower world growth and increased supply of key commodities.

Iron ore prices fell to a two year low to below $144/t (US$100/t) due to weakness in global steel demand and falling steel production in China, while prices for base metals, lithium, nickel and metallurgical coal remained weak.

Notably, the gold price hit a new record high of $3608/oz (US$2500/oz), driven by expectations of interest rate declines, the lower US dollar and Chinese demand for alternative investments.

Export earnings

Among the resource commodities, iron ore was the largest exporter, contributing $138b.

Liquefied natural gas (LNG), metallurgical coal, thermal coal and gold rounded out the top five exports, contributing $69b, $54b, $37b and $33b, respectively.

Federal Resources Minister Madeleine King says these forecasts underpin the ongoing importance of Australia’s commodity sector to the country’s economic wellbeing.

“Despite reductions in some bulk commodity prices, there have been record gold prices and ongoing gains in iron ore export volumes,” she said.

“The resources and energy sector continues to underpin Australia’s economy and support more than a quarter of a million direct jobs.”

She went on to add that although lower prices for iron ore and LNG exports are feeding into these forecasts, Australia’s production of these commodities continues to support the economy.

“Lower prices for critical minerals underline the need for government support for our critical minerals sector through policies such as the production tax incentive,” she said.

“Measures such as the critical minerals production tax incentive and the newly established minerals security partnership finance network signed with partners such as the US, India, the Republic of Korea, Japan and the UK will help create jobs and prosperity for future generations.”

Minerals Council of Australia chief executive Tania Constable says that while mining is the cornerstone of the economy, there are distinct challenges emerging.

“The FY24 budget outcome and REQ forecasts reveal the vulnerability of Australia’s economy to fluctuations in commodity prices, highlighting the pressing need for governments to prioritise mining investment to secure the nation’s long-term economic growth and the budget’s fiscal strength,” she said.

“With these challenges confronting Australia head on, it is critically important that governments pursue productivity-enhancing policies that attract investment in mining, create more jobs and increase the nation’s economic resilience to withstand future economic downturns.”

The REQ predicts export earnings will fall to $354b in FY26 but then level out and start to rebound over the next two years.

Budget surplus

The REQ follows the Federal Government announcing its final Budget outcome with a second consecutive surplus of $15.8b recorded in FY24, the first back-to-back surpluses recorded in nearly two decades.

This is a significant increase to the $9.3b first recorded in May, however, Federal Treasurer Jim Chalmers says the outlook ahead is challenging.

“Tax receipts are $5.3b lower than forecast, with a challenging outlook ahead as global economic uncertainty has weighed on the prices of our key commodities,” he said.

Just over $5.1b was put towards Australia’s mining, manufacturing and construction sectors in FY24.