Bloomie has no idea what it is talking about:
Australia’s policy makers face a new challenge as they pump stimulus into a faltering economy: the Saudi Arabia-Russia clash that’s sent oil prices plummeting and belted the third-largest export Down Under.
The cost of crude — which liquefied natural gas is typically priced off — fell by nearly two-thirds in the first three months of this year. While cheaper gasoline may help households, the rapid growth of the LNG industry in Australia now means lower oil prices aren’t the positive for the domestic economy they once were.
…“The slump in oil prices hurts Australia’s economy more than it helps. That may come as a surprise, given Australia is a net oil importer. But the transformation of Australia’s economy over the last decade into the world’s largest LNG exporter means that the slump in oil prices could more than halve the value of Australian LNG cargoes landed Japan, placing exports worth 2.5% of GDP at risk.”
Poppycock. The lower the oil and gas price crashes the better. The reason why is simple. The LNG sector pays very little tax so the income hit is minimal. It employs very few people so the employment hit is minimal. The volumes will still go out so the GDP impact is minimal.
The only hit will be to the Australian trade account but the capital account boost will offset a lot of that given most of the sector is foreign-owned and will see collapsed outgoing dividends.
Meanwhile, since Australia’s failed energy markets benchmark gas and electricity off Asian prices, the falls in prices provide a massive stimulus to every household and business on the east coast.
A few months ago, local gas and electricity prices were being benchmarked at 14% Brent oil at $11Gj local. At its lows last week (before the Trump oil fantasy took hold) it was $8Gj, a huge stimulus via lower utility bills.
The collapse in oil and gas prices is unambiguously positive for Australian economic activity.
Bloomie would do much better to ask why it is that Australian benefits when its second-largest export crashes in price.
