A strong dollar, drought and falling metal prices are expected to put a dent in Australia's exports although earnings will top $140 billion this financial year.
The federal government's commodity research agency, which had predicted annual growth of four per cent growth in September, says its latest earnings forecast represents a one per cent increase on 2006-07 exports.
The Australian Bureau of Agricultural and Resource Economics (ABARE), in its December issue of Australian Commodities, says the benefit from huge investments by the mining industry is starting to come through.
But farm export-earnings have been adversely affected mainly by a drought-reduced winter grains crop.
“Farm export earnings are forecast to decline by more than three per cent to $26.8 billion in 2007-08 because of poor seasonal conditions in many parts of Australia,” ABARE executive director Phillip Glyde said.
Export earnings from grains are forecast to decline by 14 per cent, mainly because of substantially-reduced carry-over stocks from the previous year, meaning shipped volumes will be well down.
“While much of the commodity focus has recently been on the lack of rain and its effect on both irrigated and non-irrigated agriculture, mineral resources will continue to be far and away the mainstay of Australia's commodity export performance,” Mr Glyde said.
Mr Glyde said benefits from high levels of investment in the mining industry were apparent with the volume of mineral-resources production and exports increasing.
Mineral and energy exports are forecast to be about $110 billion in 2007-08, an increase of two per cent compared to 2006-07.
ABARE said its mineral-energy exports forecasts were slightly less that it predicted in September because of the negative effect on earnings of the Australian dollar and some weakening in metals prices.
But earnings from energy exports are forecast to jump by seven per cent to $42 billion, supported by an increase in the value of thermal coal, LNG, uranium, crude oil and related petroleum products exports.
Metals and other minerals are forecast to contribute nearly $68 billion in 2007-08, a decline of more than one per cent from the previous year.
“The fall reflects the effects of lower prices for a number of metals and an assumed higher Australian dollar,” he said.
In a separate article, ABARE says the booming Indian economy will provide further opportunities for local exporters.
India already is one of Australia's export countries, growing 37 per cent to $10.1 billion in 2006-07, having averaged 34 per cent growth in the previous five years.
India is Australia's fourth-largest export market behind the United States, Japan and China and takes about six per cent of Australia's total exports.
“India's large population, geographic proximity and potential for strong income growth make it an increasingly important maket for Australian exports,” ABARE said.
“Australia's commodity exports to India have increased rapidly in recent years, and there will be further opportunities as India's economic expansion continues.”
India's economy is one of the fastest-growing in the world, averaging 8.0 per cent growth since the early 2000s, up from 6.0 per cent in the 1990s.
Australian exports of minerals and energy commodities to India were about $8.8 billion in 2006-07, with gold now the major export, overtaking coal in recent years.
Agriculture exports are relatively low at about $0.8 billion.
“The actual pace of export expansion will, however, depend on the progress of India's economic policy reforms, including those relating to protective trade practices,” ABARE said.