Placing even greater pressure on government coffers, the forecasts published on Monday also point to the risk of a sharp contraction in earnings from Australia’s most valuable export, the steel-making material iron ore.

With iron ore prices trading around two-year lows as China’s slowing property market dampens demand, Australia’s iron ore earnings are tipped to fall by about $30 billion this year – from $138 billion to $107 billion, before easing to $99 billion in 2025-26.

Federal Resources Minister Madeleine King on Monday said export earnings from Australia’s resource and energy sector were continuing to normalise due to slower global growth, lower commodity prices and a stronger Australian dollar.

However, King said Monday’s forecasts also underlined the ongoing importance of the commodities to the nation’s economic prosperity.

“The resources and energy sector continues to underpin Australia’s economy and support more than a quarter of a million direct jobs,” she said.

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Along with fossil fuels and iron ore, Australia also has significant known reserves of some of the metals the world will need in vastly greater quantities in the accelerating push to tackle climate change, such as lithium, a key ingredient in the batteries that will power electric cars and store renewable energy.

Automakers across the globe have been scrambling to lock in supplies of lithium recently, striking long-term contracts with producers in Western Australia and the Northern Territory.

However, prices for the commodity have fallen sharply amid a slowdown in electric vehicle sales. Analysts have attributed this to softer consumer demand in China and a combination of policy changes and higher interest rates elsewhere, which raise the cost of electric cars compared with internal combustion engine vehicles.

The government forecasts suggest earnings from Australian exports of hard-rock lithium will fall from $9.9 billion to $6.3 billion this year, before rising to $8.2 billion in 2025-26.

King on Monday said the Albanese government was “stepping up to lead on critical minerals” to the benefit of Australia and the world.

“Lower prices for critical minerals underline the need for government support for our critical minerals sector through policies such as the production tax incentive,” she said.

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