Commodities Should Continue To Support AUD

The Australian is reporting that the value of Australian lithium exports could exceed those of coal as prices continue to rise. The Resources and Energy Quarterly from the Office of the Chief Economist published today predicts that earnings from copper, lithium and nickel (used in alternative energies) are should double this financial year from 2020-21.

• The report also expects that earnings from resource and energy exports in 2022-23 should exceed last year’s on the back of the lower AUD and higher global energy prices. However, they are likely to decline to still elevated levels next year.
• The risk to these forecasts is skewed to the downside, as global energy supply may not be as impacted by geopolitics and demand could be weaker on global monetary tightening.
• The Office expects energy prices to remain high over its forecast period but on average other commodity prices should trend gently lower.
• There is a risk that the expected wet summer for the Australian east coast could disrupt coal exports and lift prices.
• Earnings from iron ore have been revised up this quarter by A$10bn because of the weaker AUDUSD and higher production costs. Demand from China is expected to strengthen on measures to boost its property sector.
• It notes that analysts don’t expect China to meets its 2022 growth target of 5.5%.