Soaring fossil fuel prices to generate $ 380 billion in revenue

  • Soaring Australian coal and LNG prices will provide nearly $ 400 billion in resource exports.
  • The government’s Ministry of Industry, Science, Energy and Resources said in a quarterly update that exports are expected to hit a record high in 2022.
  • The strong forecast will translate into stronger economic growth, the department said.
  • Visit the Business Insider Australia homepage for more stories.

Fossil fuel exports will generate record revenues in the years to come, with soaring Australian coal and LNG prices coupled with accelerating iron ore exports which are expected to provide $ 400 billion in resource exports to the country. country

Exports are expected to hit a record A $ 379 billion ($ 271 billion) by June 30, 2022, up 9% from September estimates, the Department of Industry said. Science, Energy and Resources in a quarterly update.

The strong forecast will translate into stronger economic growth, the department said.

Australia is seeking to be the top producer of coal and LNG, both of which are expected to maintain high prices “supported by persistent shortages and strong demand,” the department said in a statement.

Demand for copper and nickel, key materials in the clean energy transition, has boosted the outlook for base metals earnings, with strength in these areas expected to help offset lower iron ore earnings.

Iron ore accounts for about a third of the country’s total export earnings, which has been affected by the upturn in supply from Brazil’s main competitor and slowing global demand growth.

The department said there were continuing positive elements for the mining sector, with capital spending expected to increase. It hit $ 1 billion in the September quarter, the fifth consecutive quarterly increase, and 25% above its recent low reached in June of last year.

“Over the next two years, the resource and energy sectors are likely to make a significant contribution to real GDP growth, as producers increase production and exports in response to high prices and margins.” , the department said.

The report’s findings support a broader forecast that this year is likely to be the peak for Australia’s resource sector and fossil fuel exports, with revenues expected to fall to A $ 311 billion over the course of the year. fiscal year 2023 as the post-pandemic global economic recovery begins to wane.

Risks to its outlook for the current year included a further rise in global inflation, new variants of the coronavirus and a faster-than-expected decline in coal prices, the department said.

“Higher global interest rates – in response to persistent inflation – pose a downside risk to global economic activity and therefore forecasts of resource and energy exports,” he said. .

Despite sustained criticism of the Morrison government’s climate commitment following the COP26 climate summit, the Coalition’s plan to cut emissions by 70% from 2005 levels by 2050 leaves industries largely behind. extractives out of the equation.

When announcing the plan, Prime Minister Scott Morrison said the program “will not cost jobs, either in agriculture, mining or gas,” instead promoting a technology-driven approach to reduce carbon pollution with incentives to develop hydrogen and carbon capture and storage. projects.

Investments in major Australian resource projects have increased dramatically, as developers seek to take advantage of the opportunities presented by the decarbonization process, according to a separate report from the department. The inclusion of hydrogen in its figures increased the value of projects undertaken by 24% last year.

Resources Minister Keith Pitt said the figures showed the importance of the sector to the national economy.

“These are exceptional results which will create new jobs and opportunities in our regions and benefit all Australians,” said Pitt.

“Hundreds of new projects underway, including 60 new or expanded coal mines, will create thousands of new jobs, especially in regional areas,” he said.

“The higher projected profits are expected to continue to benefit the entire community, including through the royalties states use to pay for hospitals, roads and schools, services we all rely on.”

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