Office of Chief Economist: Iron ore to fall forever now

Longer-term readers of MB will recall that we fought a long battle with the idiot optimists in what used to be called the Bureau Resources and Energy Economics (BREE). Eventually, we so salted the earth around the failed forecaster that it was disbanded and its primary output shifted to the Office of the Chief Economist within the Department of Industry. Since then, it has done a better job of being realistic with its forecasts which is important since they form a critical input for the budget.

Today is has sustained that sense with its March QTR update which looks out to 2025:

Return of the iron ore price floor!

Return of the iron ore price floor!

We can quibble over the details but basically, the Office sees Australian exports earnings falling forever now:

The permently high plateau of dirt

The permanently high plateau of dirt

There will be a bit of baton passing, with iron ore the chief laggard, with some small offset in base metals which are in some kind of supercycle (to which I reply with a giant yawn):

Base metals supercycle

Base metals supercycle

I expect it to be worse but this is close enough for a government forecaster.

China’s new Five Year Plan makes it so with less infrastructure and less housing plus urbanisation sliding down the backside of the boom. There is nothing proposed globally that can offset that trend for resources.

David Llewellyn-Smith
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  1. Know IdeaMEMBER

    And the predicted flat outcome forever is based upon ever rising volumes. Fortunately, volumes could not possibly reduce.

  2. We not only dig up one of the most abundant metals on earth, but we decide to base most of our export trade on it and sell it to pretty much one customer.