Australia records largest trade surplus in history as miners get a boost from rising commodity prices in June quarter

Australia recorded a trade surplus of 7.1% of GDP in the June quarter of 2022, which is the largest trade surplus in the history of the national accounts.

The $16 billion quarter-on-quarter increase in the trade surplus to $43.1 billion helped Australia’s current account surplus rise to $18.3 billion from $2.8 billion in the previous quarter.

Notably, the June quarter marked Australia’s 13th consecutive current account surplus, following 175 consecutive quarters of current account deficits.

As miners continued to benefit from rising commodity prices, the share of national income going to business profits during the quarter hit a record high of 32.9%, while the share going to labour was 48.5%, the lowest share ever recorded despite solid growth in employee earnings.

Source: Resources and Energy Quarterly June 2022 – Office of the Chief Economist.

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Sky-high commodity prices

Australia’s export value increased by 14.7% in the June quarter compared to the March quarter, while the value of imports increased by only 4.6%, according to data released by the Australian Bureau of Statistics (ABS).

The record trade surplus was largely driven by a 15.6% rise in resource exports.

Australia’s coal exports rose by 40.4% while other mineral fuel exports increased by 20.2%.

The country’s resource and energy export earnings are estimated to be worth $405 billion in 2021-22 and are forecast to rise to $419 billion in 2022-23, delivering two successive record years, as per the Office of the Chief Economist.

As global supply responds to high prices and commodity demand moderates, Australia’s export earnings are forecast to fall below $338 billion in 2023-24, still the third highest ever.

Federal Resources Minister Madeleine King said that the fallout from Russia’s invasion of Ukraine was driving continued strong demand for Australian resources and energy as many Western nations moved away from Russia to find alternative sources of supply.

Miners reap record profits

ABS data shows miners are reaping more profits than all other non-financial industries combined, thanks to higher commodity prices.

Mining companies’ profits soared 14%, or $10.2 billion, for the month of June, according to ABS data.

Their gross operating profits are 51% higher over the year and 94% above pre-COVID-19 levels, giving a boost to federal and state government budgets.

Grace Kim, acting head of international statistics at the ABS, said: “The increase in the current account surplus was driven by higher commodity prices.

“Coal prices were elevated over the 2021-22 financial year, with annual exports of coal exceeding $100 billion for the first time.”

War in Ukraine drives coal higher

Coal prices have jumped since Russia’s invasion of Ukraine with forecasts of stronger demand from Europe and Asia continuing to propel its price.

Spot physical coal loaded at Australia’s Newcastle port hit an all-time high of $436.71 earlier this month, according to a biweekly index compiled by OPIS.

Coal has seen a resurgence in demand due to a shortfall in global gas supply as some buyers avoid Russian imports, and with slow investments in other sources including renewables.

Australia’s metallurgical coal export values are forecast to track with price movements, rebounding from $23 billion in 2020–21 to peak above $60 billion in 2022–23.

LNG revenue and volume hit record

Australian LNG export revenue increased in July to a record $6.84 billion, up from $6.69 billion in June and up 59% year-on-year, as per data from energy consultant EnergyQuest.

The country exported a record 82.6 million tonnes of LNG in the 12 months to June 30, with Japan now re-establishing itself as Australia’s largest LNG customer.

Source: Resources and Energy Quarterly June 2022 – Office of the Chief Economist.

Australia’s value of LNG exports is forecast to jump 19% to $84 billion in the year to June 2023, even as volumes are expected to dip by 3% due to declining output from gas fields feeding the North West Shelf and Darwin LNG plants.

World’s largest exporter of lithium

Australia is the world’s largest exporter of lithium.

In 2020, 46% of the world’s lithium came from Australia and exports of lithium are expected to continue to increase, contributing $9.4 billion in revenue to the Australian economy by 2023-24, as per ABS data and forecasts.

In the June quarter of 2022, Australia’s total lithium exports were $2.632 billion, up by a whopping 737%, or $2.318 billion, from the June quarter of 2021.

From a state perspective, Western Australia accounted for more than 99% of Australian lithium exports in each month since January 2021.

Iron ore prices remain stable

Iron ore prices have remained relatively stable in the June quarter of 2022 and averaged around US$130 a tonne (CFR).

Australian export volumes are estimated to have grown (by 8 million tonnes) to 876 million tonnes in 2021–22, with new supply coming online.

Source: Resources and Energy Quarterly June 2022 – Office of the Chief Economist.

Exports are forecast to rise to 929 million tonnes by 2023–24, as per the Office of the Chief Economist.

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