Record high commodity prices may ease over the next five years, but Australia’s economic growth will remain positive, according to the latest commodities report from the Australian Bureau of Agricultural and Resource Economics.
Record high commodity prices may ease over the next five years, but Australia’s economic growth will remain positive, according to the latest commodities report from the Australian Bureau of Agricultural and Resource Economics.
Abare says that, from 2007 to 2012, world economic growth will slow from the 4.3 per cent expected this year to 3.9 per cent, a drop of 1 per cent from 2006.
While global economic growth should remain strong in the next few years, factors such as a slowdown in the US economy, the global trade imbalance, and the potential for an investment boom-bust cycle in China could affect this trend.
Despite the drought, Australia’s economic growth is expected to lift from 2.5 per cent this financial year to 3.75 per cent in 2007-08, provided regional areas receive rain in the next few months.
But, mirroring the global trend, economic growth in Australia should ease to about 3 per cent in 2011-12.
The country’s overall earnings from commodity exports are forecast to reach $147.6 billion in 2007-08, up 7.1 per cent on the anticipated $137.8 billion for the current financial year.
Minerals and energy exports are tipped to increase from $108 billion to $116 billion in 2007-08, while the value of farm exports is expected to increase by less than $1 billion, to $27.2 billion, by next financial year.
The Abare report predicts world oil prices will continue to retreat from the record levels reached in 2006, provided global production levels continue to rise.
Resource hungry economies in Asia are likely drive Australia’s annual global steel production upwards by 4.7 per cent to 2012, ensuring strong demand for iron ore and metallurgical coal continues.
Growth in iron ore production should be strong, increasing by 9 per cent a year during the period, as a result of improvements to infrastructure and increasing project capacity.
Zinc prices, which reached a record high of $US4,619 per tonne in November, will remain high, due to global demand, although in the medium term are expected to soften once the production-consumption deficit is corrected in 2008.
However, gold prices may decrease over the period to 2012, following an anticipated decline in resource prices.
This follows a significant 36 per cent increase in the gold price between 2005 and 2006, and a predicted increase of 11 per cent this year.
Uranium prices and global mine production are both set to increase, with the spot uranium price forecast to rise by 91 per cent in 2007, and by 10 per cent the following year.
Outside of the resources sector, wine grape production is predicted to fall by almost 30 per cent this financial year, and despite a medium-term increase in volume of wine exports, slower growth is likely, with unit values of exports projected to fall in real terms.
While production levels have been marred by drought this financial year, Abare says grain growers will sharply increase the size of their winter crops in 2007-08, with areas sown to wheat and barley set to rise by 17 per cent, and canola by 10 per cent.
Prices will remain stable in the medium term, supported by an increase in demand, particularly from the biofuels industry.
