Australia’s earnings from the export of commodities are set the drop over the next couple of years as the prices of iron ore, liquefied natural gas (LNG) and coal slump, according to the latest government forecast.

Last Monday, the Department of Industry, Science and Resources (DISR) predicted that improving world commodity supply will cut Australia’s resource and energy export earnings from a record $466bn (A$695.93bn) in 2022–23 to $408bn in 2023–24. Moreover, there will be a sharper slowdown the following year, to $348bn in 2024–25.

According to the report, the fall in revenue will be caused by “relatively soft” global economic growth combined with an expected strengthening of the Australian dollar. Furthermore, thermal coal prices have fallen in recent months due to high inventories in China.

Australia’s mining sector makes up more than 13% of the country’s gross domestic product and benefitted from the global spike in the price of commodities following Russia’s invasion of Ukraine in 2022. The supply side-driven surge has since worn off. Australia hopes to gradually produce less coal and iron ore over time but increase exports of critical minerals such as lithium, nickel and copper.

Critical mineral prices have been volatile over the past year. Although the price of lithium fell, the Department recognises its growing importance in the production of EV batteries.  According to Mining Technology’s parent company, GlobalData, Australia had the world’s second largest lithium reserves in 2021 and this year the critical mineral made up 9.3% of its total exports, the same as iron ore.

The DISR said in the report: “The investment outlook for Australia’s resources and energy sector remains healthy, underpinned by a mix of new energy and traditional commodities. The nation’s lithium producers remain well-placed to compete given a strong long-term demand outlook.”