THE government's earnings from its proposed mining tax - and its entire budget - have been underwritten by a massive upgrade in expected coal and iron ore exports in the next five years.
But despite the growing strength of the commodities boom, weak consumer spending is allowing the Reserve Bank to hold interest rates steady.
Iron ore and coal exports are now expected to earn $126 billion in 2012-13 - the first year of the mining tax - almost $40bn more than was expected by the government's official commodities adviser a year ago.
Earnings will keep growing through to 2015-16 as huge expansion projects come on stream, offsetting a slow decline in prices from the peak levels expected over the next 12 months.
The dimensions of the resources boom have been greatly increased under the latest forecasts from the Bureau of Agricultural and Resource Economics and Sciences.
By 2015-16, the resources industry will be shipping goods worth $250bn to global customers, up from $135bn this year.
Iron ore, coal and LNG, all of which are to be covered by resources taxes, will lead the growth. LNG shipments will be earning $21.1bn by 2015-16, up from $8.3bn now, as the huge coal-seam gas projects in Queensland and the Gorgon project in Western Australia come into production.
ABARES expects iron ore exports to be earning $77.8bn in five years, up 40 per cent, while coal sales will rise 35 per cent to $65.6bn.
The government's pre-election forecasts showed it expected its new resources rent tax to raise $7.4bn in its first two years. Treasury has refused to reveal the price assumptions built into this forecast, saying they were partly derived from confidential information supplied by resources companies. However, it has referred to the upgrade in ABARES' forecasts published in June last year. These covered only the 2010-11 year but implied an increase in expected earnings of 25 per cent. The new estimates of 40 per cent increases mean mining tax receipts will be ahead of budget.
The Reserve Bank board yesterday held official interest rates steady at 4.75 per cent, where they had remained since November.
Governor Glenn Stevens noted the growing strength of the commodities boom, saying Australia's terms of trade - the ratio of the prices Australia gets for exports compared to the prices it pays for imports - were at their highest level since the 1950s.
"Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices," he said.
However, Mr Stevens said households continued "to be cautious in spending and borrowing", while businesses were also cutting debt. He said the "mildly restrictive" level of interest rates was appropriate for the economy.
ABARES expects only a modest decline in export prices. By 2016, iron ore prices will be down from the peak of $US149 a tonne expected this year to $US102. This is still a long way ahead of $US68 a tonne in 2009.
Similar gains will be maintained for coal.
By 2015-16, export prices for Australia's mineral and agricultural commodity exports would be just 13.2 per cent lower than their expected peaks in 2011-12, after allowing for inflation.
ABARES says the forecast of price declines is based on new resources projects coming into production around the world and catching up with the growth in demand fuelled by China and India. "Significant delays to planned developments present an upside risk to the price projections," ABARES said, while noting that prices would also be influenced by the pace of global economic growth. It expects global growth to average about 4 per cent, while Australia's growth rate will be about 3 per cent over the next five years. This would keep the dollar trading at US90c or more.
Other exports expected to enjoy rapid growth include copper, from $6.7bn to $9bn, and uranium, from $772 million to $2.9bn.
ABARES expects the resources sector to deliver almost all the growth in Australia's export revenue. Farm exports will rise by 14 per cent over the next five years to $35bn.
