http://www.theaustralian.com.au/bus...risks-muted-hsbc/story-e6frg906-1227526327745
Australia is likely to be partly insulated from any downturn in the country’s imminent liquefied gas boom, thanks to the largely foreign-owned nature of the $220 billion LNG export projects, says HSBC.
The nation’s gas export boom is forecast to boost local economic growth over the next three years, but the exposure the country faces to upswings or downturns in the industry will be muted, says HSBC Australia and New Zealand chief economist Paul Bloxham.
More than $220 billion was invested in LNG plants during the resources boom, with the projects expected to grow export capacity to 85 million tonnes a year from 20 million tonnes currently.
Australia will overtake Qatar to be the world’s largest liquefied gas exporter by 2018, and the production ramp up is expected to add 0.6 percentage points to GDP growth each fiscal year from 2016 to 2018.
The LNG boom will assist the pick-up in the tourism and education sectors that has already been boosted by the tumbling Australian dollar.
“It is hard to get the overall economy to look too weak with that sort of positive contribution,” Mr Bloxham said.
The new LNG projects are almost entirely owned and run by multinationals, which Mr Bloxham said would shield Australia from the full upside and downside risks involved with the industry.
“There is a clear risk-sharing relationship with the rest of the world at work,” he said.
“Although Australia’s economy may therefore not have benefited from all of the upside from these projects, it should also only be expected to suffer from part of any downside.”
Much of the export volume had been forward sold to Japan, China and South Korea
and benchmarked to the oil price, and
softer economic growth forecasts for East Asia
might push down LNG prices, rather than volumes, Mr Bloxham said.
Last week, the International Energy Agency said
six liquefied natural gas projects under construction in Australia would struggle to break even due to the weak oil price.
The IEA also raised doubts any new LNG projects would be given the go-ahead for expansion this decade.
The sharp fall in oil prices since mid-2014 was likely to limit the short-term profitability of many of the projects, which would drag on corporate and state tax receipts, Mr Bloxham said.
But
the LNG projects have been built with 30- to 50-year production timelines in mind, so weaker short-term profitability — or even losses — shouldn’t stop the ramp up in export volumes which will support GDP growth regardless, according HSBC.
“While some observers are, once again, starting to get worried that Australia could see a recession at the end of the mining boom, we remain more positive,” Mr Bloxham said.
“As we noted last week, much of this positive view is due to the current upswing in the housing and services sectors, supported by low interest rates and recent falls in the Australian dollar.”
