Despite the apparent normalisation of low commodity prices, the Federal Government has predicted mining exports earnings to grow by more than 40 per cent by 2019-2020.
The release of the Department of Industry, Innovation and Science Resources and Energy Quarterly report in the December quarter showed the mining sector’s contribution to the GDP over the past decade had increased from six to nine per cent, an upswing of 50 per cent.
The department expects resources and energy earnings of $166 billion in 2015-16, down on the previous year by four per cent due to lower commodity prices.
Chief economist Mark Cully said the low price conditions that characterised 2015 were forecast to persist in the short term, and that any prospect of recovery in that time frame was limited.
“On the home front, Australia’s production of most commodities has continued to increase despite lower prices,” he said.
“The rapid increase in mining output is expected to underpin the production phase of the boom and provide some support to export earnings.
“However, the increase in volumes is unlikely to be sufficient to offset the effect of lower commodity prices across the board.
The completion of LNG projects in Queensland and WA are expected to increase Australian exports by 45 per cent, worth an additional $20 billion this financial year.
Iron ore export volume, contributed to by the newly exporting Roy Hill mine and expanding production at other mines, was forecast to grow by 13 per cent in 2016.
World steel production, despite slowing in 2015 with less demand driving prices lower, is expected to stabilise in 2016 and return to growth, with a projected increase of 0.9 per cent worldwide.
Although China’s demand for steel will continue to slow, this will be offset by increased demand in India (by six per cent), the EU (1.2 per cent) and USA (1.5 per cent).
Australia’s steel consumption in the September quarter was down seven per cent on the previous year, and down 44 per cent of demand ten years earlier, thought to be at the expense of domestic production rather than imports.
The report also identified that Australia exports around 56 per cent of the world trade in iron ore, while projections indicate we will also soon become the world’s largest exporter of coal and LNG.
exploration expenditure faltered in 2015, continuing an ongoing trend of unemployment in the sector, with an overall decline of 32 per cent in the September quarter bringing total expenditure down to $977 million, boding poorly for new greenfields projects in the coming years.
The largest decline in exploration was recorded in South Australia, which was down 57 per cent year-on-year.
In terms of capital expenditure the mining sector slowed spending by 29 per cent in the September quarter year-on-year.
Mining sector employment was estimated at 220,000 people in November 2015, down only two per cent on the previous year.