Cumulative export earnings from iron ore, coal, and LNG will be A$110bn lower than previously forecast to about A$640bn, says the ANZ report “Australia Major Project Update 2015”.
Decreasing prices in these three commodities, amongst others, are major drivers of the anticipated decline.
Australia’s spending on mining, energy and infrastructure projects is also set to take a plunge. Capital expenditure is expected to drop by more than 60%, from A$88mn last year to around A$32bn in 2017.
Australia plans to move from oil and gas infrastructure to new types of projects. “The focus is shifting to two other areas of infrastructure, namely the agricultural, transport and social infrastructure, like hospitals,” says Peter Sargent, ANZ head of transaction banking, Europe, in a phone conversation with GTR.
The report sees public-backed infrastructure spending remaining subdued in the near term, before increasing in 2017 – with most of the work initially occurring in New South Wales. According to Sargent, education and delays in infrastructure spending in the states of Queensland and Victoria are due to recent changes in government, while uncertainty about local privatisation programmes subsists. Private lenders from overseas, like Asia, the Middle East, the USA and Canada, are willing to step forward, but “the big problem is not funding, but political uncertainty,” says Sargent.
Lower demand from China, Australia’s major export partner, is responsible for driving down both prices of raw material and exports revenue. Rebecca Harding, CEO of Delta Economic, tells GTR: “As China reorients its economy away from exports and infrastructure, its demand for mined goods slows. Australia is one of the major importers into China of mineral products and is very dependent as an economy on China’s economic health. If China is slowing or re-orienting its economy, then Australian investments are likely to produce lower returns.”