A new direction for Australia’s Commodity Markets- March 2021
Australia’s mining industry is being encouraged to diversify its export markets beyond key commodities such as iron ore and gold. A Trade and Investment Growth report on Australia’s trade and investment profile reveals political and security risks from Australia’s export reliance on China and increasing demand for other East Asia, threatening the strength of the economy. Historically, Australia has capitalised on natural advantages to grow exports in resources and agricultural sectors Whilst it has been highly profitable in the past, our current low level of economic diversity may create longer-term challenges for economic growth, stemming from China’s dominance over trade flows. According to DFAT (Foreign Affairs and Trade), at least 60 countries have listed China as their largest merchandise trading partner in 2018.
Australia’s potential economic growth remains vulnerable in its reliance on exporting natural resources. METS Ignited, an organisation that aims to improve the international competitiveness for Australian suppliers to the mining industry has suggested that Australia diversify exports by commercialising mining-related technology. Broadening customer base to improve of security of demand for Australia’s industries. However, it is important to note that Australia’s resource sector is not overexposed to China; with iron ore excluded from trading profile, China only represents 15% of Australian resource exports. Minerals Council of Australia (MCA) chief executive officer Tania Constable encouraged the mining industry to look towards new markets in ASEAN countries.
The ABS revealed that Australia’s iron ore exports increased by 20 per cent in 2020 to reach $116 billion, while gold exports rose by 12 per cent to $27 billion. Strength in commodity prices driven by upbeat global sentiment has resulted in the AUD nudging up to US$0.77. This has contributed to the economy’s rapid growth of 3.1% in the December quarter, topping forecasts of 1.5% with the strongest back-to-back quarterly performance in 60 years (3.4% in September Quarter).