Will the election dampen the Australian resource sector?

-- | 30/05/2022

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Jon Mills: We either will have a small majority Labor government or Labor minority government. And they'll have to negotiate with the Greens or the Teals and the other independents. I think overall though, I would expect more incremental change than something radical, like shutting down our coal mines or even a carbon tax. Thermal coal it's obviously, probably the riskiest of the commodities that Australia produces just because it's responsible for so much carbon dioxide emissions around the world. I mean, thermal coal is burned to create energy, and it's very, very polluting. And Australia is a big thermal coal producer. But again, I would expect an incremental change rather than something that is really economically negative to what is our largest export.

So you're talking parts of the economy that are part of or big part of our economy. And so I think that will make the current government whether its majority Labor or minority, a lot more hesitant than they were three years ago to do something radical.

If there is a carbon tax, then it'll, I mean, let's look at coal it will make it even harder than it currently is to get approval to build new thermal coal mines in Australia. And the thing about thermal coal is it's really determined by the demand overseas particularly in Southeast Asia. And so it'll benefit the current producers like Whitehaven or New Hope. Just because of the supply demand dynamics of putting a carbon tax on there and the associated regulation in terms of essentially stopping new thermal coal mines from being built.

This report appeared on www.morningstar.com.au 2022 Morningstar Australasia Pty Limited

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