Coal news and updates

Australian government budgets are facing a potential $12 billion windfall this financial year as ­prices of iron ore and coal, the ­nation’s two biggest exports, continue to surge, defying expec­tations as steel demand holds up in China at the same time as the Asian powerhouse holds back its own coal production.

 

Federal tax revenue, West Australian iron ore royalties and Queensland and NSW coal royalties could rise by a combined $12bn more than the governments had budgeted for this financial year if iron ore and thermal coal prices hold at current levels and coking coal contract prices can be sustained, according to calcu­lations by The Australian.

 

The boost in expectations comes on the back of a tripling in coking coal spot prices since the start of June to a five-year high of $US258.50 a tonne, a doubling of thermal coal prices since the end of June to a four-year high of $US105.80 a tonne and a 20 per cent increase in the price of iron ore, which had been expected to slide as more supply came on, to a six-month high of $US64 a tonne.

 

“This could be a game-changer for Australia,” HSBC’s local chief economist Paul Bloxham said.

 

“It’s clear, given the rise we’ve seen in both coal and iron ore ­prices, that the drag on (national) incomes is now in the past and that the gains have the capacity to significantly change the narrative on the Australian economy,” he said.

 

“Increased (national) income flows through to corporate profits; some of that gets through to wages growth and because the fiscal ­coffers are boosted through tax, some of that filters through to the household sector through wages growth.”

Australian government budgets are facing a potential $12 billion windfall this financial year as ­prices of iron ore and coal, the ­nation’s two biggest exports, continue to surge, defying expec­tations as steel demand holds up in China at the same time as the Asian powerhouse holds back its own coal production.

 

Federal tax revenue, West Australian iron ore royalties and Queensland and NSW coal royalties could rise by a combined $12bn more than the governments had budgeted for this financial year if iron ore and thermal coal prices hold at current levels and coking coal contract prices can be sustained, according to calcu­lations by The Australian.

 

The boost in expectations comes on the back of a tripling in coking coal spot prices since the start of June to a five-year high of $US258.50 a tonne, a doubling of thermal coal prices since the end of June to a four-year high of $US105.80 a tonne and a 20 per cent increase in the price of iron ore, which had been expected to slide as more supply came on, to a six-month high of $US64 a tonne.

 

“This could be a game-changer for Australia,” HSBC’s local chief economist Paul Bloxham said.

 

“It’s clear, given the rise we’ve seen in both coal and iron ore ­prices, that the drag on (national) incomes is now in the past and that the gains have the capacity to significantly change the narrative on the Australian economy,” he said.

 

“Increased (national) income flows through to corporate profits; some of that gets through to wages growth and because the fiscal ­coffers are boosted through tax, some of that filters through to the household sector through wages growth.”

 

Any revenue surge could ease pressure on Australia’s AAA ­credit rating. Ratings agency Standard & Poor’s recently warned it could cut Australia’s credit rating because of a weakening federal budgetary position. Any ratings cut could have a knock-on effect for state credit ratings.