LAUNCESTON, Australia (Reuters) – Iron ore and gold may seem unlikely bed fellows, but in the current coronavirus pandemic they are combining to try and hold up Australia’s reputation as the “lucky country”.

While the country’s unbroken 29-year stretch of economic growth will be ended by the pandemic, the resource sector is proving to be key in cushioning the blow and likely ensuring Australia outperforms other developed economies.

The Australian government’s flagship resources report forecast that earnings from exports of resources and energy will reach a record A$293 billion ($201 billion) in the current fiscal year that ends on June 30.

This will drop to A$263 billion in the 2020-21 fiscal year, the according to the report released on Monday by the chief economist at the Department of Industry, Science, Energy and Resources.

A 10% decline in export earnings from minerals and energy may seem like quite a blow, but the report notes that earnings from exports will be 50% higher in real terms than during the 2008 global financial crisis.

The coronavirus pandemic has hit most commodities, with the exception of the traditionally contrarian gold, but the declines haven’t been evenly spread, with energy such as crude oil, coal and liquefied natural gas (LNG) tending to fare worse than metals.

While Australia is the world’s largest exporter of LNG and coking coal, and ranks second in thermal coal, it is also the biggest shipper of iron ore, and the world’s second-largest gold producer.

It is iron ore that is doing the bulk of the heavy lifting in keeping Australia’s resource exports buoyant, with the report forecasting export volumes of 852 million tonnes in 2019-20, rising to 893 million in 2020-21 and 912 million the following year.

A slight drop in the forecast price from $78 a tonne in 2019-20 to $77 in the following fiscal year means the export value drops slightly from A$103 billion this fiscal year to A$97 billion in 2020-21.

It’s worth noting that the government is being cautious in its price forecasts, with its expected iron ore price well below the current spot price of $103.50 a tonne, as assessed by commodity price reporting agency Argus.

This is a reflection of some of the risks around how the global, and Chinese, economies will recover from the public health lockdowns that have crushed growth.

There are also the risks of renewed trade tensions between the United States and China, especially as the political temperature is likely to rise ahead of President Donald Trump’s attempt to win a second term in the November election.

But what the government forecast also shows is the advantage of being the world’s largest exporter of a commodity sought after by China, which buys about two-thirds of global seaborne iron ore.

While tensions have risen between Australia and China in recent months over Canberra’s support for an international probe of the origins of the novel coronavirus and Beijing’s early response, it’s likely that the iron ore trade would be the last impacted by any ill will.

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It’s the prevailing view that Australia is overly exposed to China for its exports, but it’s less common to take the view that China’s economy is heavily dependant on steel, and its steel industry is largely beholden to Australia’s iron ore miners.

GOLDEN HUE

The other stand out commodity for Australia is gold, with the government forecasting exports will rise to 418 tonnes in 2020-21 from 362 tonnes in 2019-20, with revenue jumping to A$32 billion from A$27 billion.

Again, the gold price forecast is cautious at $1,587 an ounce for 2020-21, well below the $1,770.95 an ounce in early Asian trade on Monday.

Many gold analysts expect the precious metal to continue to rally over the medium term given the massive amounts of fiscal stimulus around the world and the low interest rates, with some countries having negative real interest rates.

While gold and iron ore look constructive for Australia, both grades of coal are likely to struggle, even though export volumes are expected to remain steady.

Export revenue from coking coal is forecast to drop to A$25 billion in 2020-21 from A$35, while thermal coal declines to A$16 billion from A$20 billion.

LNG volumes are also expected to be constant around 80 million tonnes per annum, but revenue for 2020-21 is seen slipping to A$35 billion from A$47 billion, given weakness in the oversupplied spot market, as well as softness in crude oil-linked longer-term contracts.

Overall, what the government’s latest quarterly resource and energy report shows is the advantage of having a diverse portfolio of commodity exports.

While iron ore and gold are holding up Australia for now, it’s quite possible that LNG, coking coal or alumina may be the big movers in the next upswing.