The rate of fall in Australia’s commodity export income is slowing, judging by the latest forecasts from the Australian Bureau of Agricultural and Resource Economics released today.
Income is now estimated to fall to $160 billion in the year to June 30, 2010, down from the $162 billion estimate last March and the $196 billion expected for the year to June 30, 2009.
But ABARE warned that the stronger Australian dollar might clip earnings during the year.
The dollar has risen by around 12% so far this quarter leading ABARE to warn: “There is a distinct possibility the Australian dollar could remain at its current level or even appreciate further against the U.S. dollar in the near term.”
Phillip Glyde, ABARE’s Executive Director said a forecast increase in winter crop production combined with relatively favourable world prices for many agricultural products “is expected to support farm export earnings in the short term.”
Farm export earnings are forecast to increase by 2% to $32.5 billion in 2009-10, following a 16% rise to $31.8 billion in 2008-09. (The 2010 forecast for rural products is up marginally from the $32.1 billion forecast in March.
ABARE said higher farm export earnings are forecast to come from wheat, barley, canola, lupins, peas, rice, raw cotton and sugar. For energy and minerals, export earnings are estimated to be “significantly lower” for 2009-10, mainly a result of lower contract prices for bulk commodities such as coal and iron ore.
After increasing 36% to $160 billion in 2008-09, export earnings from mining and energy are still expected to remain above 2007-08 levels at $124 billion.
ABARE said the value of energy exports is forecast to drop 34% to around $50 billion in 2009-10 while for metals and other minerals, export earnings are forecast to decline by 12% to around $75 billion in 2009-10.
Its global forecast is more optimistic than the World Bank’s new updated contraction of 2.9%. ABARE’s estimate of 1.3% is the same as the IMF’s.
“While major OECD countries are going through a period of economic contraction, the emerging economies of China and India are still expected to achieve modest growth. In 2010, world economic activity is assumed to recover, albeit at a slow rate.
“The pace of economic recovery is expected to be more significant in the emerging economies, while OECD economic growth is likely to remain weak. In aggregate, world economic growth is assumed to be 2.1 per cent in 2010.”