There is much talk about the downturn of Australia's commodity sector. But earnings from our resource and energy exports are actually expected to increase by a staggering 30% to reach record highs of $204 billion in 2016-17.
And they will stay at this level throughout 2017-18, according to the December 2016 Resources and Energy Quarterly report released by the Office of the Chief Economist.
The Australian resource and energy sector continuous to gain global market share, as large investment in new capacity over the past decade has led to falling production costs of high quality product.
But there are other factors behind the changed outlook for export earnings, which for 2016-17 are forecast 16% higher in the December report than in the September quarterly report. They include output restrictions China placed on its metallurgical and thermal coal production. While this decision has now been reversed, the effects will still be felt throughout next year.
China also had a higher than expected production of steel which has benefited Australia's metallurgical coal and iron ore exports.
And while the global use of thermal coal has been on a downturn, with global imports falling by 15% in 2015, and by 1.4$ in 2016, increased imports by India will partially offset the declining global demand elsewhere into 2017 and 2018.
For the combined export earnings from iron ore, metallurgical coal, and thermal coal the report forecasts an increase of 23% to $101 billion in the two years to 2017-18.
However, the report notes that the bulk of Australia's resource commoditity exports still strongly depends on steel production, especially in China, and that activity in China will come off the boil over the next year, with spot prices expected to fall.
But there is another export earner Australia can increasingly bank on: Liquid Natural Gas (LNG).
Australia's share in global LNG exports is set to increase from 12% in 2015 to 24% in 2018.
And according to the report forecasts, LNG will have the strongest growth in export earnings over the two years to 2017-18: they are forecast to rise by 124%, from $17 billion in 2015-16 to $37 billion in 2017-18.
Of course, there are significant uncertainties, such as the 'Trump-Effect': the new US government's tax cut and spending proposals are assumed to raise world resource consumption. However, the effects of the new US Administration's policies for the global economy are highly uncertain, the report notes.