The big drop is despite the amount of Australian thermal coal exports remaining roughly the same, and is a result of a sharp decline in coal prices due to oversupply - from $US105 per tonne in 2018 to an expected $US72 per tonne by 2021 - and a decline in contracts as importers take advantage of cheaper spot prices, the forecast said.
Office of the Chief Economist acting division head David Turvey warned of "headwinds" facing both the thermal and coking coal sectors as "weak overall demand is expected to keep prices subdued" over the next two years.
And a leading Australian analyst warned the Hunter will feel the consequences of those "headwinds" in the form of job losses.
"The Hunter Valley will ultimately be hit by reduced employment. You don't have a 30 per cent fall in prices without a concerted effort by the companies to share that pain with the workforce," said Institute for Energy Economics and Financial Analysis analyst Tim Buckley.
"The merger of Glencore/Yancoal/Rio Tinto operations provides an ongoing consolidation process, and now the heat has gone out of pricing, the management there will renew their focus on cost rationalisation i.e. workforce reductions," he said.
The warnings came only weeks after the NSW Minerals Council said "strong demand" for NSW coal was driving up jobs in the Hunter.
The quarterly Office of the Chief Economist forecast released this week revised projected export earnings down further from the June report because of a "faster-than-expected" decline in the benchmark thermal coal price over the past three months.
The revised export figure is also due to BHP announcing production at Muswellbrook's Mount Arthur coal mine could fall by up to a fifth by June, 2020 as it responds to a changing global market.
BHP will reduce overall production to focus on higher-grade coal for sale in Japan and South Korea to achieve higher unit prices and reduce its exposure to the volatile Chinese market. But the move also includes higher per-tonne costs.
The Office of the Chief Economist warned that "weak demand has placed downward pressure on the thermal coal price" while at the same time "large volumes of thermal coal have entered the seaborne market since 2018, resulting in an oversupplied market".
While a "gentle recovery" in the thermal coal price is expected in the longer term, there are "several risks", the forecast warned.
"Developments in China's import policies and domestic coal markets are likely to drive ongoing volatility in thermal coal imports and prices," the forecast said.
It noted the impact of "growing challenges for coal projects in Australia and around the world, particularly for thermal coal".
"There is a growing reluctance to commit to greenfield projects, and an expanding list of lenders have announced they will no longer finance thermal coal projects. Pension and equity funds are also divesting from coal, community opposition is growing, and challenging regulatory conditions are also impacting on investment decisions," the forecast said.
The Office of the Chief Economist forecast an even steeper drop in export earnings for coking coal - required in steel making - from $44 billion in 2018-19 to an expected $35 billion by 2020-21, despite an increase in projected exports from 183 million tonnes to 198 million tonnes over the same period.