Synergy's Economic Insights - COMMODITY PRICE AND EXCHANGE RATE YOUR CONSIDERED BRIEFING ON THE AUSTRALIAN NATIONAL ACCOUNTS BROUGHT TO YOU BY ...
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Synergy’s Economic Insights COMMODITY PRICE AND EXCHANGE RATE YOUR CONSIDERED BRIEFING ON THE AUSTRALIAN NATIONAL ACCOUNTS BROUGHT TO YOU BY SYNERGY’S ADVANCED ECONOMIC MODELLING GROUP
AUSTRALIA’S NATIONAL ACCOUNTS – MARCH 2020
Our objective is to provide key insights and thought leadership on topical issues affecting the economy
through considered analysis.
Key Questions about the Australian Economy
» How do we kick-start economic recovery post-COVID19?
» How do we uplift workforce skills and avoiding economic situation of high unemployment and economic
recession?
» How do we jump-start productivity to speed up economic recovery?
» How do we avoid chronic economic recession?
Economic Overview – March 2020 – Commodity Price
» One of the lasting outcomes of the COVID-19 pandemic is the reduced economic activity causing significant
changes in energy supply and demand patterns around the world.
➢ Crude oil prices, in particular, have fallen significantly since the beginning of the year, largely driven
by reduced oil demand because of COVID-19 restrictions of international and domestic travel in
many countries as well as interruptions in attending workplaces.
➢ Despite the April agreement between OPEC and partner countries (OPEC+) to reduce production
levels crude oil prices have remained at some of their lowest levels in more than 20 years.
➢ Short term forecasts of Brent crude oil prices are expected to average $34 per barrel in 2020 (down
from an average of $64 per barrel in 2019) with prices expected to average at around $23 per
barrel during the second quarter of 2020 before increasing to $32 per barrel during the second half
of the year. Brent prices are forecasted to stabilise to an average of $48 per barrel in 2021 after
international travel restrictions are lifted.
» Both prices of Natural Gas and Coal have declined recently due to the lower industrial production over the
next few quarters caused by lower expected demand in the global economy.
» One the other hand, China’s demand for iron ore is expected to continue to increase in the short term with
blast furnace steelmakers stepping up operations as the attempt to catch up on previously disrupted
production, but the demand growth will be constrained in the medium-to-long run amid the spread of the
global coronavirus outbreak.
➢ Balance of payments continued to worsen significantly over the March 2020 quarter impacted by
the restriction of international trade and continues to impact negatively on the value of the
Australian dollar. The exchange rate adjustment also results in increasing competitiveness
Australian exports in overseas markets aiding towards returning the Balance of Payment to balance
in following periods.
➢ While industrial production in Australia will remain constrained, the maintained activity in the
mining sector has allowed Australia to retain resource exports revenues at previous levels.
Page 2
200 Commodity Price Indices 200
180 180
160 160
140 140
120 120
100 100
80 80
60 60
40 40
Jul-16
Jul-17
Jul-18
Jul-19
Nov-16
May-17
Nov-17
Mar-18
May-18
Nov-18
May-19
Nov-19
Sep-16
Jan-17
Mar-17
Sep-17
Jan-18
Sep-18
Jan-19
Mar-19
Sep-19
Jan-20
Mar-20
Crude Oil Price Index Natural Gas Price Index
Iron Ore Price Index Coal Price Index
Source: Index Mundi, Synergy AMG calculations
Trade, Exchange Rate and Balance of Payment
» Balance of payments continued to worsen significantly over the March 2020 quarter impacted by the
restriction of international trade and continues to impact negatively on the value of the Australian dollar.
The exchange rate adjustment also results in increasing competitiveness Australian exports in overseas
markets aiding towards returning the Balance of Payment to balance in following periods.
» While industrial production in Australia will remain constrained, the maintained activity in the mining sector
has allowed Australia to retain resource exports revenues at previous levels.
Balance of Balance of Payments and Exchnage Rate AUD/USD
Payments $m Exchange Rate
$4,000 $0.80
$3,000
$0.75
$2,000
$1,000
$0.70
$0
($1,000)
$0.65
($2,000)
($3,000) $0.60
Sep-2015
Sep-2016
Sep-2017
Sep-2018
Sep-2019
Mar-2016
Jun-2016
Mar-2017
Mar-2018
Mar-2019
Mar-2020
Jun-2015
Dec-2015
Dec-2016
Jun-2017
Dec-2017
Jun-2018
Dec-2018
Jun-2019
Dec-2019
Balance of Payments USD Exchange Rate
Source: ABS 5302.0, Yahoo Finance, Synergy AMG calculations
Page 3What to look for in the June 2020 National Accounts
» June Quarterly trade is anticipated to see further decrease of exports, while imports might recover slightly
due to the appreciation of the Australian dollar
» The appreciation is due to the rebuilt confidence from the investors to hold Australian currency while US
dollar is losing its ground as a safe currency. Hence, Australian dollar will further appreciate (relative to
major currencies) when global economic growth recovers and rises.
What We Do
Advanced Modelling Group (AMG), specialises in:
• Labour Market, Workforce and Demographic Modelling
• Macroeconomic Modelling and Economic Impact Analysis
• Circular Economy
• Energy Modelling and Forecasting, Supply-Chain Modeling
• Cyber Security/Risk Economy
• Critical Infrastructure Modelling
Contact Us
» Dr David Schmidtchen, Partner, dschmidtchen@synergygroup.net.au
» Dr Jiao Wang, Senior Manager, jwang@synergygroup.net.au
» Dr Jan Drienko, Manager, jdrienko@synergygroup.net.au
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