A REPORT released by an Australian government body has highlighted the positive outlook for resources and energy over the medium to long term. In highlighting the essential role resources and energy continue to play in Australia’s economy despite current challenges, the report says mining sector employment is still more than twice the size than it was before the mining boom.
The Department of Industry, Innovation and Science’s chief economist report ‘Resources and Energy Quarterly’ says these sectors account for around 10% of Australia’s economy and employ more than 300,000 Australians.
This significant contribution to Australia’s economy is set to increase as Australia’s resource and energy export earnings are projected to grow by 30% to $208 billion in real terms between 2015-16 and 2020-21. Notably, Liquefied Natural Gas (LNG) export earnings are expected to increase by around 150% to $42 billion. Further, iron ore export earnings are expected to increase by 29% to $72 billion. At a staggering 926 million tonnes in 2021, this will account for 58% of global iron ore trade.
While acknowledging that challenges remain, the report highlights that consumption of most commodities is projected to increase, particularly as Asian economies urbanise. More broadly, an estimated 455 million people across the world are projected to migrate to cities over the next five years fuelling demand for energy and hard commodities.
India will be central to this growth story. Currently, India’s steel demand is less than a fifth per person compared to demand from OECD countries. Further, electricity use is one third per person of the global average and 240 million Indians do not have access to electricity. This is expected to dramatically change with annual growth of 7.7% over the medium term and a commitment from India’s Government to supply all villages with 24-hour access to electricity within five years. India’s thermal coal imports are expected to increase by around 6% and LNG imports by around 19% each year.
Minister for Resources, Energy and Northern Australia Josh Frydenberg says, “In the face of softer commodity prices, a lot of hard work has been undertaken to increase the competitiveness of Australia’s energy and resources sectors.
“Innovation plays an important role with research and development expenditure by resources and energy companies accounting for around 15% of all such expenditure in Australia.
“Boosting productivity has helped ensure that Australia maintains its competitive edge through this challenging period. With commodity demand set to increase in the medium to long term, the outlook for these sectors continues to look bright,” he said.