PERTH (miningweekly.com) – Despite boosting Australian output and incomes over the next few years, the ramp-up in liquefied natural gas (LNG) production was not expected to have much of an effect on Australian living standards, the Reserve Bank of Australia (RBA) reported on Thursday, owing to the high level of foreign ownership in the sector, as well as the low labour intensity required during the production phase.

In its March quarterly bulletin, the RBA noted that LNG exports were expected to increase substantially as a number of large-scale LNG projects started production within the next few years.

In value terms, the LNG sector was expected to become the country’s second-largest commodity export by 2018, after iron-ore. The start-up of the Queensland Curtis LNG project and the Gladstone LNG project, combined with the strong performance of the existing plants, was forecast to increase LNG export volumes by 11% during 2014/15, to 26.2-million tonnes.

However, the RBA pointed out on Thursday that the decline in LNG investment and the ramp-up in production and exports was expected to affect Australia’s economic output and national income in a number of ways.

The RBA stated that as investment in the LNG sector continued to fall, it would subtract from the gross domestic product (GDP) growth over the next few years, as the construction of large-scale projects was gradually completed.

As the projects began to ramp up production, the bank estimated that LNG exports would contribute around 3⁄4 percentage point to GDP growth in 2016/17. The timing of the boost would depend on whether these projects were completed on schedule and how quickly production was ramped up.

As production of LNG gradually stabilised at a higher level, the boost to GDP growth would dissipate, although GDP would remain at a higher level.

Meanwhile, the rise in LNG export receipts was expected to affect the domestic economy in a number of different ways, the RBA said, pointing to household incomes, which would be boosted for those employed in either the LNG investment or production phase.

However, the bank noted that liaison and company reports suggested that the production phase of LNG was highly capital intensive and would not require as much labour as the investment phase.

Meanwhile, government revenues were also expected to rise as LNG production increased.

Federal government revenue would increase through corporate tax income and the petroleum resource rent tax, while some state and territory governments will receive higher royalties.

The RBA noted that the magnitude of the increase to revenues would depend on the prevailing oil price and royalties arrangements between state and territory governments and LNG producers, and the extent to which tax payments would be reduced by deductions.