Australia's resource and energy export earnings are expected to increase by 30 per cent in 2016-17 to a record $204 billion, according to the Department of Industry, Innovation and Science.
This is despite a predicted decline in iron ore prices which are expected to plummet to $US46.70 a tonne in 2018,
In its Resource and Energy Quarterly report, the department said export earnings would be boosted by higher prices for steel-making raw materials (iron ore and coking coal), thermal coal and increased LNG export volumes.
The department noted that demand for raw materials, including iron ore and metallurgical coal, were driven by a rebound in the Chinese construction sector. However, earnings are expected to steady in 2017-18.
"Prices have been boosted by continued growth in demand from China's steel sector, as well as disruptions to the supply of a number of resource commodities," the department commented in the report.
"While the surge in bulk commodity [prices] has lasted longer than initially expected, given the temporary nature of many of these factors, the prices of metallurgical and thermal coal and iron ore are expected to decline in early to mid-2017."
Dramatic decline in iron ore prices
Iron ore prices are expected to dramatically decline over the next two years, averaging $US51.60 a tonne in 2017 and $US46.70 in 2018, compared with current spot prices around $US80, which is double the price a year ago, according to Reuters.
Metallurgical coal on the other hand, is expected to rise to $US182.20 a tonne in 2017, up from $US114.40 in 2016. Thermal coal averaged $US62 a tonne in 2016 according to Reuters.
The mining sector's share of Australia's GDP fell to 6 per cent in 2015-16, its lowest share in over a decade, but the Australian Government anticipates higher commodity prices and increases in export volumes will see the sector make a larger contribution to the economy in 2016-17.
But, in the report's foreword, Mark Culley, the chief economist at the DIIS, warned the outlook for resources and energy investment remains subdued over the short to medium long term.
"Unfortunately, the high prices that are expected to bolster Australia's resources and energy export earnings in 2016-17 are not expected to last," he wrote.
Source: ABC News