Australian current account surplus in 2015?

From Morgan Stanley comes a small note with a big argument:

LNG exports from Australia could be the next big thing, in our view. The ramp-up would be enough to see Australia record a current account surplus in 2015, the first since 2Q 1975.

What’s more, with the global market physically unable to create arbitrage opportunities via US shale gas (due to lack of export capacity), the price story for LNG exports remains supportive, with long-term contracts locked in linked to oil prices.

By 2017, Australia may also overtake Qatar as the world’s largest LNG exporter. Also by that time, we believe that Australia’s total energy exports (LNG plus steaming coal) would be as large an export as iron ore.

Hmm, what can I say? I don’t want to talk this down. It would be an awesome outcome, possibly.

It is not new. Basically this is another way of talking about the so called “third phase” of the mining boom.

The calculations behind the CAS are not provided. The swing factor will be domestic demand. For imports to fall away so consistently there’s going to have to be pretty weak consumption growth so this note also implies the argument we’ve been making at MB for some time, that the next few years are going to look much better than they feel if we’re going to get a CAS. It’s always possible to run a CAS. The challenge is can you do it and still be growing?

Another point to note is the same one I made in my recent LNG report, the competitive challenge to Australian LNG arrives in five years, at which time many of the same projects driving the CAS will find themselves at the wrong end of the cost curve, making the surplus temporary.

As well, if you look at the above chart, you will see that most of the volume growth that occurs after 2015 is from projects that do not yet have investment commitment. Ironically, MS is using this as an argument to go long Aussie dollars but if our competitiveness doesn’t improve (including via a lower dollar) then the projects will never get up.