The 5-year official forecasts for commodity prices reveal some surprising winners and losers
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The Department of Industry and Resources has released its official five-year forecasts for commodity prices, with the iron ore price expected to trade more than 25 percent lower than where it is today in FY29. Meantime, copper, nickel and uranium prices are expected to rise materially as the world decarbonises and embraces greater electrification and nuclear energy.
Mining stocks comprise a huge proportion of the ASX, and commodity prices directly affect share prices and company earnings. Therefore, these official price forecasts can provide valuable insights for shareholders of major miners like BHP, Rio Tinto, Fortescue, Mineral Resources and South32.
Australian resource and energy export earnings are forecast to be $417 billion in FY24. This is about 10 percent lower than the record $466 billion in exports last year. Those record exports were largely the result of a spike in energy prices as Western countries sought to avoid Russian oil and gas. Export earnings are expected to fall to about $369 billion in FY25 due to falling commodity prices, primarily energy prices, and a rising AU/US dollar. Exports would then level out through to FY29.
Iron ore is expected to remain Australia’s biggest earner among all our resource and energy exports, followed by liquified natural gas (LNG), other metals, metallurgical coal, thermal coal, base metals, and gold. The iron ore price closed 1.5 percent higher overnight at US$104 per tonne. It’s fallen 10.5 percent over the past month due to weaker Chinese demand. The department is forecasting an average price of US$103 per tonne in FY24. By FY29, the average is expected to have fallen to US$75 per tonne.
LNG prices are expected to fall from an average of AU$17 per gigajoule this financial year to AU$12 per gigajoule in FY29. Metallurgical coal will fall from US$289 per tonne in FY24 to US$207 per tonne in FY29. Thermal coal will drop from US$135 per tonne in FY24 to US$115 per tonne in FY29.
The oversupply of lithium seen last year as global production ramped up while demand fell amid fewer people buying electric vehicles (EVs) is set to continue to weaken lithium commodity prices. Some Australian lithium miners, such as IGO and Core Lithium, have suspended some of their operations after lithium prices plummeted in 2023. The department expects an average price of US$1,800 per tonne this year, falling to an average of US$1,231 per tonne in FY29.
Some particular metals are expected to soar in value due to the green energy transition. The average price of copper, which is essential for electrification and used in solar panels, wind turbines and EVs, is expected to be about US$8,258 per tonne this financial year. By FY29, the department expects copper to be trading above US$10,000 per tonne.
The nickel price has fallen dramatically in recent times, largely due to much new supply generated in Indonesia by Chinese-backed operators. The nickel price has dropped from an average price of US$23,911 in FY23 to US$16,845 today. The Federal Government recently added nickel to its Critical Minerals List to give Australian producers access to funding for support. The resources department expects the nickel price to recover somewhat to an average price of US$20,950 in FY29.
Another commodity expected to rise significantly in value over the outlook period is uranium. Many countries are embracing nuclear energy and building small modular nuclear reactors (SMRs) to support domestic energy needs. The uranium price leapt from an average US$51 per pound in FY23 to a 16-year high of US$106 per pound in February. The department anticipates an average price of US$85 per pound for FY24, rising to US$119 per pound in FY29.
“While global prices are easing, the [forecast] shows demand is likely to be sustained for commodities used in low emissions technologies, including iron ore, copper, aluminium and lithium,” said Resources Minister Madeleine King. The department noted that Chinese demand will continue to heavily influence commodity prices, however, India is now experiencing the world’s strongest economic growth and its expanding manufacturing sector will mean higher demand for resources.
Article originally published on Kanebridge News Australia
Millions of workers will see the impact of Stage 3 tax cuts in their next pay packet
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Stage 3 tax cuts will commence on Monday, providing 13.6 million workers with tax savings that they will see in their first pay packets of FY25. The average Australian wage earner on $74,500 per year will receive a $1,540 tax saving over the new financial year. The Superannuation Guarantee is also going up from 11 percent to 11.5 percent from Monday, providing the same worker with a $372 bump per annum to the superannuation payments they receive from their employer.
The Albanese Government amended the Stage 3 tax cuts in January to give every taxpayer a tax cut rather than only those on higher incomes. Many economists have argued the tax cuts will add to inflation, which is proving to be remarkably sticky. Yesterday, the Australian Bureau of Statistics released the May inflation figures showing a 4 percent annual increase in inflation, up from 3.6 percent in April.
The Federal Government decided to amend the legislated tax cuts in January to help more Australians with rising cost of living pressures. Official advice from the Federal Treasury said the amendments were “broadly revenue neutral” because they would cost almost the same amount as the original Stage 3 plan, which had already been factored into inflation forecasts. The amendments reduced the tax break for earners at the top end to enable tax relief for everyone. A Treasury document said the changes “will not add to inflationary pressures and will support labour supply”.
The tables below outline how the tax rates and tax brackets will change from Monday.
At a press conference after the Reserve Bank announced interest rates would remain on hold last week, Governor Michele Bullock said she expects some people would use their tax cuts to cover everyday expenses while others would save it.
“What we do observe in the data is that people who have mortgages – on average, not all – but people on average who have mortgages tend to try and put more into their offset accounts and their redraw facilities because they’re paying quite a high interest rate now on their mortgage and so they want to offset it,” she said.
A Westpac survey found Australians planned to save up to 80 cents for every $1 of tax savings.
“The results suggest consumers will use tax relief as an opportunity to repair their finances and rebuild saving buffers rather than spend,” said senior Westpac economist Matthew Hassan.
If taxpayers followed through on this plan, Mr Hassan said only $4.7 billion of the $23.3 billion in tax relief would be spent, equating to a spending boost of 35 basis points.
