Australia is on track for record mining and energy revenues, and the sector’s new found strength is reflected in rising investments in exploration projects.
According to the latest two year outlook by the Australian Government’s Office of the Chief Economist, Australian resource exports will reach $282 billion in 2019-2020, $3 billion less than previously estimated, but still a record result.
The June Resources and Quarterly report projects a small decline in the following year, down to $258 billion, as Brazil is recovering from a disaster at a major iron ore mine earlier this year.
However, supported by a low Australian dollar the mining sector is in a good position to weather unfavourable global trade conditions, including through growth in capital investments.
The report notes that productivity in major parts of the mining sector may also be stronger than traditional measures suggests, which could help in globally uncertain times.
Importantly, on the back of the sector's positive export performance there has been a turnaround in the mining industry’s exploration expenditure.
According to trend estimates from the Australian Bureau of Statistics, investments rose by 5.2% ($31.3 million) in the June quarter 2019, and are 16.5% higher than over the same period last year (note, though, that the data do not include petroleum exploration).
It shows a continued recovery, after a slump in mineral exploration between 2012 and 2015, which is largely driven by investments in Western Australia and underpins the increasing dominance of the state’s mining industry (see figure).
Notably, much of the rise in exploration expenditure (57.1% in original terms) is targeted towards areas of new deposits. A slight dampener to this otherwise positive outlook is that, according to the ABS estimates, the actual metres drilled in resource exploration projects fell slightly (1.25%) in the June quarter 2019, although it is still 4.7% higher than in the same period last year.
This leaves oil and gas, a major export industry in Australia, with the value of exported Liquid Natural Gas reaching $50 billion, while that of refined petroleum products and crude oil was over $16 billion.
Export volumes associated with the LNG boom were the main driver of the mining industry's growth over recent years, and LNG contributed around 13% of Australia’s growth in GDP in the year to March 2019.
On the back of this development, investment in petroleum exploration scratched the $1.5 trillion mark just 5 years ago, but that seems distant past now after investments dropped sharply between 2013 and 2016 (see figure).
The ABS estimates that in the 2019 June quarter total petroleum expenditure was just $314 million, and although this is slightly up from the previous year, the trajectory of Australian investment in petroleum stagnates (see figure).
However, as reported previously, another global LNG investment boom may be around the corner, and potentially also could provide needed stimulus for the Australian LNG industry.