URGENT UPDATE: Australia’s economic outlook is grim as government economists predict a significant downturn in iron ore prices due to a slowdown in China’s steel production. According to new data from the Department of Industry, Science and Resources, mining and energy receipts are projected to fall by 5 percent, dropping from $385 billion in 2024-25 to $369 billion in 2025-26.
The iron ore market, a crucial pillar of Australia’s economy, faces a steep decline, with prices expected to drop from $86 per tonne in 2024-25 to $82 per tonne by 2026-27. Earnings from iron ore are forecast to decrease from $113 billion in 2025-26 to $103 billion in the following year. This downturn comes as the Chinese government actively works to reduce steel production, addressing overcapacity that threatens to drive prices and quality down.
The Federal Government’s Resources and Energy quarterly report highlights how China has been attempting to curb steel output since March to manage production levels. The softening demand aligns with a significant 11.2 percent drop in Chinese property investment in the first half of 2025, contributing to a 20 percent reduction in new project starts.
Despite these challenges, Australian miners remain undeterred, with an expected export volume of 918 million tonnes in 2025-26, slightly increasing to 926 million tonnes in 2026-27. Iron ore exploration has surged by 11 percent year-on-year as companies seek to expand operations in the face of declining ore grades.
In contrast, gold is shining bright in this bleak landscape. Earnings are projected to soar to $60 billion in 2025-26, a substantial leap from $47 billion the previous year. This surge in gold prices, which recently hit a record of $3920.63 per ounce, positions gold to surpass liquefied natural gas as Australia’s second-highest value resource export.
Federal Resources Minister Madeleine King emphasized the importance of gold mining in sustaining local economies, stating that it “helped build this nation” and continues to generate wealth and jobs today. “Australia’s resources and energy sector remains strong, with gold and critical minerals playing an increasingly important role in our export mix,” she added.
However, the lithium market faces a less optimistic future, with earnings expected to rise from $4.8 billion in 2024-25 to $6.1 billion in 2025-26 as more lithium hydroxide enters the market, yet a meaningful recovery remains unlikely.
The immediate implications of these developments are significant for Australia’s economy and its global trading partners. As iron ore prices decline, the ripple effects will be felt across various sectors. The situation is developing rapidly, and stakeholders will be monitoring these changes closely.
Stay tuned for updates on this evolving story as Australia navigates these economic challenges and shifts in the global commodities landscape.
