The Australian government said on Tuesday the Ukraine war presented significant upside risks to price assumptions for its coal and liquefied natural gas exports while China’s slowing economy carried downside risks for iron ore prices.
The risks were presented in the government’s budget for the fiscal year ending June 2023, which assumes prices of Australia’s key export commodities will return to long-term fundamental levels by the end of March next year and for the terms of trade to fall in 2023/24.
In handing down the budget, Treasurer Jim Chalmers said the boost to revenues from higher employment and commodity prices was likely to be “temporary”.
The government’s long-term commodity price assumptions for iron ore were $55 per tonne, compared with $91 when the budget was prepared.
For metallurgical coal, the long-term price assumption is $130 per tonne from $271, and $60 per tonne for thermal coal from $438 per tonne when the budget was prepared.
“Nevertheless, in light of the ongoing 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,” the government said in its budget papers.
(By Sam Holmes; Editing by John Mair)