Associated News, page-1923

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https://www.theaustralian.com.au/nation/politics/cut-gas-supply-and-fuel-poverty-says-resources-minister-madeleine-king/news-story/12a9dceafcc98083a47db8a24f39665c

Resources Minister Madeleine King has warned that decreasing gas supply faster than demand will lead to “shortages, supply disruptions and high prices”, while also “worsening poverty and inequality”, launching a strong economic defence for the fuel source’s role in underpinning the nation’s clean energy transition.

The release by the government on Tuesday of a discussion paper on its future gas strategy coincides with the release of new forecasts revealing the value of Australia’s annual minerals and gas exports will plunge by more than $100bn in two years, marking the end of a commodity price super cycle that has turbocharged company profits and underpinned the first federal budget surplus in 15 years.

Ms King said the government’s future gas strategy would provide the “long-term policy clarity needed to support decisions across communities, industry and governments”, while also helping households make decisions about using gas.

As Labor faces pressure from the Greens and environmental groups to ban new gas developments, Ms King said the resource would play an evolving role as a transitional energy source as the world decarbonised.

But she said Australia would face a key challenge in getting the balance right at home, warning that reducing supply too quickly would penalise the nation’s most vulnerable.

“We need to ensure gas demand decreases faster than supply through the energy transition,” Ms King said. “Gas shortages, supply disruptions and high prices are among the consequences of reducing supply faster than demand.

“These consequences disproportionately impact those who can least afford them, worsening poverty and inequality.”

Ms King was a supporter of Woodside Energy’s proposed Scarborough gas development in Western Australia that was last week halted after the Federal Court found there was a lack of consultation with an Indigenous group opposed to the $16bn project.

The latest Resources and Energy Quarterly from the Department of Industry, Science and Resources reveals how an anticipated retreat from record prices for raw materials such as iron ore, metallurgical and thermal coal and liquefied natural gas will drive the plunging value of earnings.

A slowing global economy, not least the result of China’s sluggish recovery from Covid lockdowns, will cut export earnings from a record $467bn in 2022-23, to $400bn in 2023-24, with a likely further slowdown to $350bn in the following financial year, the report says.

Responding to the report, Ms King said “while overall export revenue is easing from record highs, Australia’s resources and energy exports remain strong and continue to underpin Australia’s economic wellbeing”.

Despite the rapid slowdown in mining and energy producers’ earnings, the new departmental price forecasts are well above Treasury’s recently upgraded but still notoriously conservative assumptions, suggesting Jim Chalmers could continue to report multibillion-dollar improvements to the commonwealth’s bottom line in coming budgets.

The natural resources sector directly employs 300,000 Australians, contributes nearly 14 per cent to the national economy, and makes up two-thirds of the country’s total merchandise exports.

The official government department forecasts will also add to the growing prospect that the Treasurer will be in the position to deliver consecutive surpluses.

Dr Chalmers was stung last month by comments by independent economist Chris Richardson that the confirmation of a $22.1bn surplus in the most recent financial year and the $157bn improvement in the federal government’s bottom line over the four years to 2025-26 had happened “despite our politicians, not because of them”.

Mr Richardson said “the budget got better mostly because it was never as bad as Treasury projected it to be”.

Nevertheless, Treasury’s conservatism could see another substantial revenue upgrade at the mid-year budget update later this year.

ABARES predicts iron ore prices will average $US92/tonne through 2023-24, and $US80/t in 2024-25, compared to the implied budget estimates of $US76/t and $US60/t in the two respective financial years.

Iron ore recently traded at close to $US120 per tonne.

Based on Treasury sensitivity analysis, a $US10/t higher-than-anticipated iron ore price adds $500m to commonwealth tax receipts, suggesting $1.8bn in additional tax revenue over the two financial years.

Similarly, the department forecasts the Newcastle thermal coal price – which sits at $US160 – will average $US144/t this financial year, versus an implied average of $106/t in the budget. For 2024-25, the forecast gap is even larger, at $US124/t compared to $US70/t.

The Office of the Chief Economist from the Department of Industry, Science and Resources also found that “following the end of Chinese restrictions on Australian coal imports, Australian thermal coal exports to China have returned to previous levels”.

“However, Australian metallurgical coal has struggled to regain Chinese market share: new rail links have facilitated a recent surge of Mongolian metallurgical coal exports to China in the past year or so, and Russia has been able to divert some of its coal exports to China (and India) from the Western nations which have banned Russian exports,” the report says.

The report highlights the opportunity to capture more of the rapidly expanding market for lithium-ion batteries, as only 10 per cent of the battery-making value chain is in mineral resources.

Australia is a leading exporter of battery minerals such as lithium, cobalt, copper and nickel, and surging global demand for electric vehicles continues to drive increased demand for battery metals, the report finds.

Global demand for lithium-ion batteries is projected to more than quadruple by 2030. While the country’s natural endowment of these resources will be a continuing boon, the department highlights that the nation should be more ambitious.

“There is an opportunity for Australia to move downstream in the battery value chain,” the report says.

“The global energy transition continues to pick up pace, with global investment in clean energy expected to reach $US1.74 trillion in 2023. Australia is well placed to benefit from the clean energy transition, given our rich geological reserves and expertise, and track record extracting these minerals.”

Ms King said “the road to net zero is paved by Australia’s critical minerals”.

“During my visit to Europe and the UK over the past week I met with leaders in government and industry seeking access to Australian critical minerals and rare earth elements. Demand for Australian minerals is growing as the world works to build the technology needed to decarbonise,” she said.

The September 2023 Resources and Energy Quarterly forecasts iron ore export earnings to decline to $120bn in 2023-24, from $124bn last financial year, before dropping further to $99bn in 2024-25, as lower prices reduce trade values.

LNG earnings are forecast to drop from $93bn in 2022-23 to $71bn this year, and $63bn in 2024-25, as energy prices retreat from the highs triggered by Russia’s invasion of Ukraine in 2022.

Australian lithium exports are forecast to decrease to $18bn this year and $16bn in 2024-25, down from the record $20bn in 2022-23.

Earnings from metallurgical coal, used for steelmaking, are expected to fall from $62bn last financial year to $47bn this year, and $41bn in 2024-25. Thermal coal earnings are forecast to decline to $36bn in 2023-24 from $66bn, and fall further to $28bn in 2024-25.