This could light a whole other fire under property.
There’s a factor out brewing in left-field that could have a huge impact on our property markets in 2022.
The mining boom 2.0.
I don’t know if you were in the markets for the last one – around 2014. In that mining boom, huge commodity demand out of China created a massive pay-day for our miners. All this money in turn flooded government coffers and coursed through the veins of the Australian economy.
In the end, as it always does, that money found its way into real estate, and housing prices boomed.
And it looks like we’re about to repeat the whole story.
Because right now the world is in the grip of an epic ‘energy crisis’. That’s what they’re calling it and they’re not wrong.
Energy prices – from oil to gas to coal – are soaring. LNG prices are up something like 500%.
But for a little commodity exporter like Australia, that’s actually fantastic news. And for our miners, it’s an incredible stroke of luck.
Woodside and Santos, for example, have just reported their quarterly earnings, and they’re through the roof. Revenue is up a massive 80% on a year ago.
Woodside Petroleum and Santos raked in almost $3.6 billion in sales in the September quarter, up 80 per cent from the same time last year as the oil and gas producers cashed in on the international energy price crisis.
… “It’s unprecedented and wonderful, obviously,” Woodside chief financial officer Sherry Duhe told The Australian Financial Review of the prices that drove a 19 per cent jump in the company’s quarterly sales to $US1.53 billion.
“But equally, if not more exciting, is what we’re expecting in Q4 … It will be a strong quarter, based on what we’re seeing to date.”
And it’s not so much about volumes. It’s all about prices, as prices remain stuck to the ceiling.
In fact, the AFR reported that a tanker of LNG cost $10m a year ago. Today it cost $281m!
Soaring international gas prices have triggered a near 30-fold spike in the value of a single spot cargo ship of LNG to more than $US205 million ($281.8 million) in a price surge that delivers a windfall to gas producers but threatens to derail the global economic recovery.
The 40 per cent surge in Asian benchmark LNG prices to more than $US56 per million British thermal units, while shortlived, has sent shockwaves through the global gas market, given the cold Northern Hemisphere winter has yet to kick in.
So it’s a good time to be Australia. Our terms of trade are already soaring, and the trade balance was booming, even before we take account of the strong second half of the year we’re looking at.
So good times. Flush times.
The only trouble is that sometimes you can have too much of a good thing.
All this good fortune can make you lazy.
It’s like the good looking kids at school who never invest in themselves, and just figure than can live on their good looks forever.
(Totally not bitter.)
But our fortune may be our curse.
The Harvard Kennedy School’s Center for International Development last year released its Atlas of Economic Complexity. It reckons Australia has one of the least complex economies in the world, behind tech-powerhouses Senegal and Uganda.
And look, when you’re exporting literal dirt for a living, it’s hard to make a claim to complexity.
But that’s tomorrow’s problem.
Today, we’re raking in the money hand over fist.
The little battler gets lucky again.