The natural order

Australian Prime Minister Kevin Rudd's strategy of centring an election pitch on his ability to steer the country through the end of a China-led minerals boom is overlooking the next big thing: natural gas.

The Treasury this week 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 September 7 poll may find that gloom lifts from 2015 as a surge in gas exports replenishes Australia's coffers and propels the nation towards 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 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 gas projects across the nation - three of which are operating and seven under construction - will boost budget revenues by A$11 billion (HK$77.7 billion) a year from 2015 to 2025, McKinsey estimates. The projects would add 2.6 per cent to gross domestic product, or A$5,500 per household each year and support 180,000 jobs, the 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 on Tuesday, the Treasury forecast the budget deficit will narrow by almost A$20 billion between fiscal 2015 and 2016. Australia's liquefied natural gas export earnings are projected to increase fivefold to A$61 billion to June 2018, the government's Bureau of Resources and Energy Economics (BREE) says. BG Group's venture on the coast of Queensland state is due to begin next year and Chevron's A$52 billion Gorgon project on Barrow Island off northwest Australia - the largest resources development in the nation's history - is scheduled to start delivering cargoes in early 2015.