Report: Trade risks are reducing Australia's resource earnings.
A government report released on Monday said that Australia's mining exports and energy earnings will continue to decline over the next two-years due to increased risks of trade barriers and falling bulk commodity prices, as well as a weakening global economy.
According to the June-quarter report of Australia's Department of Industry, Science and Resources, uncertainty over U.S. president Donald Trump's policy has disrupted international trade, forcing companies to delay investment decisions.
The increased caution has led to a further decline in activity. "The associated uncertainty will likely impact on world commodity demand as Australia's suppliers are affected," the report stated.
The outlook is less certain than usual.
In April, Trump imposed 10% tariffs on most goods imported from other countries. However, he suspended the higher levies for many trading partners until next month.
Trump claimed last week that the U.S. and China, Australia's biggest trading partner, had signed a trade agreement, but did not give any details.
Australia's estimated commodity earnings for the 2024-25 year, which ends this month, is A$385 ($252 milliards), down from A$415 in 2023-24.
This is expected to drop to A$369 Billion next year, and A$352 Billion in 2026-2027.
The report stated that prices for Australia's largest export, iron ore, and liquefied gas would likely be lowered due to a higher global supply. The report said that iron ore exports could drop from A$116bn this year to A$105bn next year, and A$97bn in 2026/27 due to a higher global supply.
The report stated that gold will be the star of next year. It is expected to become Australia’s third largest export after iron ore, LNG and A$56 billion. Both volumes and prices are expected to rise.
In a recent statement, Resources Minister Madeleine King stated that "higher prices for gold and higher forecasted copper and lithium imports are partially offsetting the effect of lower prices for coal, iron ore and LNG."
The report stated that lithium prices will slowly recover after the recent fall, with revenues expected to increase from A$4.6bn this year to A$5.5bn next year, and to A$6.6bn in 2026/27. Reporting by Renju José in Sydney, editing by Jamie Freed.
(source: Reuters)
