Meanwhile, it expects the oil price will dip from $US108 a barrel to $US100 a barrel and the LNG price declines from $US934 a tonne to $630 a tonne.
According to papers, “the budget assumes glide paths for iron ore, metallurgical coal and thermal coal start from their recent averages in late September, and glide down over the December 2022 and March 2023 quarters to their assumed long-term fundamental price levels”.
Still, it acknowledges that there are disparate forces at play.
“In light of the Russian invasion of Ukraine, there is substantial upside risk to the thermal coal and LNG price assumptions, while China’s weakening growth outlook presents a downside risk for commodity prices, particularly iron ore.”
For instance, if commodity prices were to remain high over the final three months of 2022 and then glide down in the first half of 2023, this would boost nominal GDP by $43.8 billion – $35 billion in 2022-23, and $8.8 billion in 2023-24.
The government’s tax revenues would also be boosted by $9.9 billion – $2.5 billion in 2022-23, $6.5 billion in 2023-24 and $0.9 billion in 2024-25 (the delayed impact on tax receipts reflects the lags in tax collections).
The budget is forecasting a 1 per cent increase in mining exports in 2021-22, as a result of temporary disruptions to production, including from wet weather, operational disruptions and maintenance.
Mining export growth is then expected to rebound to 5 per cent in 2022-23, as production disruptions ease, and production rises at new iron ore mines, including BHP’s South Flank, Rio Tinto’s Gudai Darri and Fortescue Metal’s Eliwana projects.
The growth in mining exports is then expected to ease back to 2.5 per cent in 2023-24, reflecting a slowdown in the growth in productive capacity.
Mining investment is forecast to rise by 0.5 per cent in 2021-22, before jumping to 9.5 per cent in 2022-23, and then falling back to 1.5 per cent in 2023-24.
The budget says that although iron ore investment is continuing, it is primarily aimed at maintaining production capacity. At the same time, LNG investment is expected to rise over the coming months as construction work starts on recently announced projects.