SINGAPORE, March 29 (Reuters) – The good news for Australia is that it can expect a flood of cash from resource exports this fiscal year because of rising exports and relatively strong prices for iron ore, coal and liquefied natural gas (LNG).
The bad news is this windfall is unlikely to be sustained for long, and export earnings are likely to fall in four of the five years after the current 2018/19 fiscal year.
The risk for Australia is that its politicians will be tempted to lock in permanent tax cuts and spending measures based on a likely temporary windfall, especially given the expected federal general election in May.
The Australian government’s Resources and Energy Quarterly, released on Friday, forecasts total earnings from commodity exports at A$277.8 billion ($196 billion) in 2018/19, up 22 percent from the prior fiscal year’s A$227.5 billion.
Australia is the world’s largest exporter of iron ore and coal, and is on the verge of overtaking Qatar as the biggest shipper of LNG. It’s little surprise that these three commodities make up the lion’s share of resource earnings, with iron ore expected to contribute A$74 billion, coal A$70 billion and LNG A$50 billion.