Australia is fully-mounted on the current global inflationary surge in energy: our energy exports are forecast to jump 81% in value in the coming financial year alone to $88 billion, the value of mineral exports is forecast to rise by a quarter and the value of rural exports could be up 12%.
In fact so rapid will be the rise in the value of our commodity exports that total income will be up 40% in the coming financial year, according to the Australian Bureau of Agricultural and Resource Economics.
In fact the forecast value of mineral and energy exports alone in the coming year will top the value of all commodity exports in 2007-08: $178 billion compared to $151.4 billion.
That will rise now that Rio Tinto and soon BHP Billiton, win higher than expected price rises for iron ore exports to China.
ABARE says the total commodity exports are now forecast to rise 40% to more than $212 billion for the year to June 30, 2009.
If that doesn’t produce trade surpluses over the coming year, nothing will. If we can’t generate trade surpluses, Australia will have no chance ever of paying its way.
"The strength of Australia’s minerals and energy exports continues to underpin commodity sector performance,” ABARE acting boss, Karen Schneider said in a statement accompany the release of the June edition of the Bureau’s publication, Australian Commodities.
"The price outlook across minerals and energy commodities remains positive, reflecting continued strong demand and only modest world supply growth.”
The forecasts do not yet factor in any impact from the Western Australian gas supply crisis.
Not only are we riding the boom in China, India and other emerging markets, but we have hitched ourselves nicely to the surge in oil and energy costs that are driving petrol prices higher.
And we have our place on the food price escalator: that’s if nature is kind to us and we don’t have a third year of drought and cut winter grain crops.
Instead of complaining about higher oil and petrol prices, not to mention rising food costs, we should remember that without them, the Australian economy would be adrift, unemployment would be rising and wages falling.
ABARE says in its latest quarterly forecast, that the value of Australian commodity exports will jump 40% in 2007-09, up from its March estimate of a 30% rise. The graph above helps explain the reason for the sharper increase.
Oil prices are surging: the hit $US136 a barrel in new York overnight, despite Saudi Arabia agreeing to lift its production by 200,000 barrels a day.
ABARE says that earnings from commodity exports are forecast to be $212.3 billion in 2008-09, compared with an estimated $151.4 billion in 2007-08, (a rise of 40%) and the March forecast of $189 billion.
For agricultural commodities, export earnings are forecast to be $30.2 billion in 2008-09, an increase of 12% from $27.0 billion in 2007-08, reflecting higher earnings from wheat, barley, cotton lint and seed, sugar, wine, pulses, canola, and sorghum.
For forest and fisheries products, export earnings are forecast to be around $4.1 billion in 2008-09, 5% higher than in 2007-08. The estimate for rural exports is slightly down on the March forecast.
ABARE said the value of Australia’s minerals and energy exports is forecast to be nearly 50% higher, at $177.9 billion in 2008-09, compared with an estimated $120.5 billion in 2007-08.
In March ABARE said the total value of Australia’s minerals and energy exports was forecast to rise by 33% to a record $153 billion in 2008-09, following a forecast rise of 7% to $115 billion in 2007-08; so the value of 2007-08 exports is up $5 billion in the space of three months alone, and the increase for the coming year has risen $25 billion.
The rise in the value of 2007-08 exports is despite the blow from the central Queensland flooding which slowed coking coal exports for several months.
For energy commodities, export earnings are forecast to increase by 81%, from $48.8 billion in 2007-08 to $88.3 billion in 2008-09. For metals and other minerals, export earnings are forecast to rise by 25% to $89.6 billion in 2008-09.
And we have to remember that, according to ABARE figures, the mining boom was coming to an end in the March quarter until higher oil, gas, coking coal and iron ore prices intervened to renew it.
ABARE said that the index of unit export returns for Australian commodities, in aggregate, is forecast to rise considerably in 2008-09, following a rise of 8% in 2007-08.
"This is mainly the result of significantly higher energy and mineral prices."
Unit export returns for Australian mineral and energy commodities are forecast to rise by around 37% in 2008-09, following a rise of 8% in 2007-08. The increase in 2008-09 is largely a reflection of higher forecast prices for crude oil, coking coal, thermal coal, aluminium, gold and iron ore.
Unit returns for energy exports are forecast to rise by 69% in 2008-09, compared with an increase of 22% in 2007-08. Unit export returns for metals and other minerals are forecast to increase by 14% in 2008-09, compared with a reduction of almost 1% in 2007-08.
ABARE said that for rural commodities, the index of unit export returns is forecast to be largely unchanged in 2008-09, after increasing by 9% in 2007-08. The effects of forecast lower world indicator prices for wheat, sugar, rice, wool and dairy products are expected to offset forecast higher world cotton, coarse grain and oilseed prices.
