Prime Minister Kevin Rudd’s strategy of centering an election pitch on his ability to steer Australia through the end of a China-led minerals boom is overlooking the next big thing: natural gas.
The Treasury two days ago forecast deeper budget deficits in the next three years as growth slows, unemployment rises and mining investment wanes, constraining Rudd and opposition leader Tony Abbott’s election pledges. Whoever wins a three-year term at the Sept. 7 poll may find that gloom lifts from 2015 as a surge in gas exports replenishes Australia’s coffers and propels the nation toward becoming the biggest shipper of the fuel.
The commodities “story isn’t over, it’s just changing its shape,” said Paul Bloxham, chief Australia economist at HSBC Holdings Plc in Sydney and a former Reserve Bank of Australia economist. “It’s part of the reason we’re still cautiously optimistic about Australia’s growth prospects.”
Ten liquefied natural gas projects across the nation — three of which are operating and seven under construction — will boost budget revenues by A$11 billion ($10 billion) a year from 2015 to 2025, according to estimates compiled by McKinsey & Co. Inc. The projects will add 2.6 percent to Australia’s gross domestic product, or A$5,500 per household each year and support 180,000 jobs, the New York-based consultancy forecast.
While Rudd is talking up the risk of recession should Abbott’s Liberal-National coalition win government and cut spending, the Treasury’s projections reflect a turnaround seen starting from July 2015. In its Pre-Election Economic and Fiscal Outlook released Aug. 13, the Treasury forecast the budget deficit will narrow by almost A$20 billion between fiscal 2015 and 2016.
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