Insights into Australia’s export outlook for 2019 from Efic

Resources, services and agricultural exports all recorded double-digit growth in 2018, with resources contributing to the lion share of Australia’s export growth (Chart). But the Department of Industry expects energy and resource export earnings to fall 1.5% p.a. in 2019, led by declines in iron ore (↓8%), thermal (↓15%) and metallurgical coal (↓14%). While export volumes are forecast to rise modestly, lower prices will result from new low-cost supply and weaker demand. LNG is the exception with receipts expected to grow 16% in 2019 driven by both stronger volumes and prices.

The outlook for manufacturing exports is less clear as uncertainties from the ongoing US-China trade stoush could have negative effects on regional supply chains. But steady global growth and the weak AUD pose upside. Markets currently expect the AUD will remain around US$0.72, though greater investor risk aversion, lower than expected commodity prices and higher interest rates in other advanced economies could put downward pressure on the AUD through 2019. Market pricing suggests that there is a 30% probability that the AUD will either fall below US$0.65 or rise above US$0.80 in 2019.

Other topics featured in World Risk Developments:

• 2019 outlook—soft landing
  
• Risks to the 2019 export outlook
  
• Upside opportunities to the 2019 export outlook