Export prices are rising

In late 2004, Australia’s terms of trade — the ratio of export prices to import prices — reached its highest level since 1974. This is improving living standards by increasing the income of Australians.

World, and especially Chinese, demand for iron ore and coal has risen sharply in the last few years. The result has been dramatic price increases for Australia’s producers.

High resource prices are good for Australia, boosting the incomes of mining companies, their shareholders (including superannuation funds) and workers.

Higher mining company profits also lead to stronger tax receipts, which can be used to benefit all Australians.

But history tells us that high iron ore and coal prices will not continue indefinitely. Around the world, miners are reacting to higher prices by investing in new mines, railways and shipping facilities.

As additional global supply comes on line, commodity prices are likely to ease. This will moderate the recent boost to Australia’s mining company profits and tax payments.

The Government has taken this into account in this budget and planned responsibly. The budget invests in our future, while maintaining strong surpluses over the next four years.