Monday, June 23, 2008

Want to know how much more money is about to come into Australia?

The forecasts out today (big pdf) from the Bureau of Agricultural and Resource Economics are stratospheric.

Our income from coal should double in the year ahead, our income from iron ore should increase 72 per cent in one year.

This is the upside, for us, or the worldwide oil and food price boom.

It is what the Reserve Bank and the Treasury have been worried about.

It makes talk of recession seem off the pace.

Tuesday's Canberra Times story below:

Soaring food and energy prices are set to boost Australia’s economy far more than they hurt it in the year ahead, adding an extra $70 billion to the nation’s income.

As petrol prices yesterday hit new highs across all Australian states, averaging 161.4 cents per litre, Australia’s leading commodity forecaster predicted an export bonanza in the coming financial with commodity export income jumping 40 per cent.

The Australian Bureau of Agricultural and Resource Economics Earnings expects earnings from mining and farm exports to top $212 billion in the year ahead, up from $151 billion in this financial year.

The forecasts are an advance on those released by the Bureau in March that predicted a 30 per cent increase in commodity export income.

They weight to concerns in the Treasury and Reserve Bank that Australia may be in for a new round of spending-fuelled inflation that will require still higher interest rates to contain.

Earlier this month the Reserve Bank Governor Glenn Stevens warned that he expected a 20 per cent increase in Australia’s terms of trade, which is a measure of the prices Australia receives for exports relative to the prices it pays for imports.

“Since 2002, the total rise in the terms of trade will, by the end of this year, be of the order of 65 to 70 per cent,” he said.

“Some other countries are also experiencing significant terms of trade rises. But few will have seen anything bigger than Australia’s over a five-year period.”

“This is why a tight monetary policy setting is essential.”

The Bureau of Agricultural and Resource Economics says income from Australia’s biggest export, so-called metallurgical coal used to make steel is expected to more than double in the coming financial year, jumping 123 per cent from $18 billion to $39 billion.

Income from the sale of iron ore is set to jump 72 per cent from $21 billion to $35 billion.

Income from the sale of thermal coal is expected to climb from $10 billion to $15 billion while income from the sale of liquefied natural gas climbs from $6 billion to $11 billion.

Income from Australia’s limited exports of petroleum products is expected to climb from $1.6 billion to $2.8 billion.

Most of the extra income is forecast to be the result of higher prices, with the worldwide price of metallurgical coal expected to triple over the course of the year.

The volume of resource exports is expected to climb more slowly with iron ore volumes climbing 18 per cent and LNG volumes 15 per cent. Gold volumes are expected to climb 6 per cent.

Wheat export volumes are expected to increase dramatically if improved rain holds, climbing 109 per cent. Volumes of wine and dairy exports are expected to climb 5 per cent and 4 per cent.

Commonwealth Securities economist Savanth Sebastian said that the Bureau was forecast thing “the biggest annual increase in commodity exports in 40 years”.

He said it would boost the entire nation’s income, “eventually filtering through the entire economy".

“Interest rates are not going down any time soon and it is likely that one further interest rate hike may be necessary towards the end of the year to combat the expected pick-up in spending,” he said.

Other figures released yesterday show that car sales slid 1.6 per cent in May, with sales of four-wheel drives slipping 4 per cent, the biggest drop for almost two years.

The average Australian price of petrol has climbed 3 cents a litre over the last week to reach 161.4 cent, a new record high. The Canberra prices is averaging 162.7 cents.