National resources, energy exports tipped to soar

Resource and energy exports are tipped to be worth $1 trillion to Australia over the next five years, according to a new Bureau of Resources and Energy Economics (BREE) report.

“This export growth is despite an increase in the value of the Australian dollar in the second half of 2011 and forecasted reduction in global economic growth in 2012,” says BREE chief economist professor Quentin Grafton.

One trillion dollars is roughly equal to the annual output of the entire Australian economy, and takes into account a predicted recession in Europe, a forecasted 6% decrease in commodity prices, a slowdown in China, reduced global growth in 2012 and an only modest recovery in the United States.

In the short term, metal prices are projected to decline by 6% in 2012 relative to 2011, but huge investments in infrastructure are likely to become a pipeline for production and export increases.

“Future growth in Australian export earnings from minerals and energy will be generated by higher volumes and, with a few exceptions, will be not be because of rising commodity prices,” the report states.

BREE’s forecast for Australian exports of resources and energy for this financial year is about $200 billion – a 10% increase on last year.

China is the biggest market for Australia’s resources and energy exports, at 26% last financial year, followed by Japan (19%) and South Korea (9%).

The Chinese economy continues to record strong growth at 8.8%, although it is projected to moderate to 8.2% in 2012, according to the report.

“In part, this expected easing in economic growth is due to domestic economic policies to combat inflation, including the continuing unwinding of the 2008–09 fiscal stimulus, tighter monetary policy and measures to contain price increases in its property market.”

In the world’s third-largest economy, Japan, industrial production and exports were severely affected by the March 2011 earthquake and tsunami, but are recovering at a greater-than-expected rate.  “Demand in Japan is expected to grow in response to the necessary rebuilding of infrastructure,” the report states.