Freelance economist Tarric Brooker has penned a weird article claiming that record gas and coal exports are “saving Australia from recession”:
Perhaps more than any other nation in the world, Australia has seen the silver lining from the storm clouds of the ongoing war in Ukraine…
Australian thermal coal prices are still 177 per cent higher than where they were before the war began. But more than that, the entire long-term outlook for Aussie thermal coal has been transformed.
The coal futures market prices coal for delivery all the way out to December 2027. Even more than five years from now, current market pricing has coal prices sitting 94 per cent higher than pre-war levels…
While liquefied natural gas (LNG) prices have come down in recent weeks due to more temperate weather and increasingly full gas storage in Europe, the longer-term demand for Australian energy exports once again remains.
Tangible benefits
In Australia during June, the nation recorded its largest trade surplus in history, exporting over $17 billion more goods and services than it imported for the month in net terms…
Over the past 30 years, every time Australia found itself in real economic trouble, lady luck has come to the nation’s aid. In this, 2022 has been no different. The changing global geopolitical landscape is currently offering the federal Treasury and the economy a bounty driven by high commodity prices.
As the sanctions on Russia continue to evolve and potentially tighten further, Australia may see more dividends driven by little more than the game once again changing in our favour.
Did Tarric Brooker not read the federal budget? It projected that domestic energy prices will rise by an average of 20% later this year and a further 30% in 2023.
Due to compounding, Australians will see their electricity bills increase by 56% while gas bills are set to rise by 44% over two years.
As H&H has pointed out, these are conservative estimates.
So, how is the gas/coal export boom going to “save Australia from recession”? To the contrary, soaring energy costs are now the key threat to the economy that will drive inflation higher, force the RBA to hike interest rates further, will squeeze household disposable incomes, will shutter energy-dependent firms, and deepen recession risks.
It is also weird that Tarric Brooker talks up the record Q2 trade surplus while completely ignoring that the nation’s net primary income deficit widened to a record high $24.0 billion over the quarter:
According to the ABS, the reason “the net primary income deficit reached record levels” was because of “high dividend payments to non-residents as profits remained strong on the back of higher commodity prices”.
So basically, the more Australian coal and gas we export, the richer foreign-owned mining companies become, and the poorer Australians get.
If soaring gas and electricity prices are a “boom” in Tarric Brooker’s eyes, I hate to see what a bust looks like.
