Almost all of that is due to the iron ore sector, which is expected to deliver $79 billion in exports. Three months ago the department was expecting iron ore to bring in $65 billion in 2019-20.
All of it is due to higher prices, caused by disruption in Brazil’s supplies, with the department actually downgrading the total volume of exports to a still-record 852 million tonnes.
The lift in iron ore will offset a drop in coal exports due to a fall in expected prices for thermal coal.
The price of thermal coal is tipped to drop by 21 per cent this year even though total Australian exports are expected to edge up slightly.
The department noted growing concern about the lift in expected thermal coal production.
“Although there is a large pipeline of potential projects in Australia, there is a growing reluctance to
commit to new greenfield projects, which could weigh on export growth beyond the outlook period,” it found.
Gold is now expected to replace thermal coal as Australia’s fourth largest resource export, reaping $22 billion in 2019-20 on the back of 370 tonnes.
Just 60 tonnes of gold will be used in Australia, half the domestic consumption recorded in 2010 in the wake of the global financial crisis when the precious metal was hoarded by some as a safe haven asset.
LNG will be Australia’s second most important export, bringing in a record $54 billion with metallurgical coal worth $39 billion.
Industry department chief economist Mark Cully said there were risks to the forecasts, particularly given the tension around international trade.
“Like any forecast, this one carries risks of a shortfall – notably if trade tensions between the US and its major trading partners, particularly China, increase,” he said.
“Disruptions to trade could hit global manufacturers particularly hard and the impacts will inevitably flow on to the commodity producers who provide them with raw materials.”
While the lift in exports will boost the budget bottom line, the department is expecting a drop in prices the following year that will hit Canberra’s coffers.
Prices for iron ore, metallurgical and thermal coal, alumina, oil, zinc, nickel and lithium are all tipped to ease into 2020-21 even as production levels for almost all resources climbs.
This is expected to translate into a $25 billion fall in mineral and energy exports in 2020-21. The department in its March update had factored in a decline of almost $12 billion.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.