(Bloomberg) – Australia’s resource industry is set to aid the economic recovery once again as higher prices and expansion plans assist the nation emerging from its coronavirus lockdown.
Mining accounts for nearly 6% of gross domestic product but plays an outsized role in national income, delivering dividends to pension funds and funds for government coffers. Iron ore, the nation’s biggest export, has broken $100 a ton amid off-shore supply concerns, providing a timely budget boost.
The government’s most recent budget numbers from December were based on iron ore falling to $55 a ton, excluding freight, by the June quarter of 2020. The government gains around A$3.7 billion for every $10 in excess of this estimate in the year to June 2021, which will assist the budget position following the massive fiscal injection.
In 2009, Australia dodged recession and rocketed into recovery as China dropped more than $500 billion of stimulus into its own economy spurring a mining investment boom Down Under. China’s stimulus package is much smaller this time — and Australia is already in recession — but the path ahead could prove similar.
While, the Australia-China relationship is in stormy waters following Prime Minister Scott Morrison’s calls for an independent probe into the origins of the coronavirus, key bulk commodities have been insulated from the spat because of the dearth of high-quality suppliers elsewhere.
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