Australian Coal Mining Industry: Supply and Demand Analysis

Running head: MICROECONOMICS
Microeconomics
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1MICROECONOMICS
Table of Contents
Introduction:...............................................................................................................................2
Australian coal mining industry price and equilibrium:............................................................2
Explanation of Australian mining industry with supply and demand model:............................4
Prediction of the equilibrium price and quantity:......................................................................6
Reference:..................................................................................................................................9

2MICROECONOMICS
Introduction:
Mining is one of the main growth generators of Australian economy under which
domestic economy has faced large amount of growth during the last three decade. It produce
sufficient amount of employment irrespective of possession of skills by the workers and
provides more than 6% to the Gross Domestic Product (GDP) of the state allowing it remain
and integral and essential part of the domestic economy (Lawrence & Nehring, 2015).
Australia being mineral reach economy faces wide amount of demand of their mining
resources in the international market and cost advantage of producing the same has
transformed it a mineral source of the world. Among many minerals, Australia is known for
their superior quality of coal that produces much amount of trade balance to the domestic
economy and good amount of economic growth as well (Simshauser & Nelson, 2015). In this
report, coal mining industry of the Australian economy will be judged and in order to do so,
supply and demand framework will be utilised. Moreover, it will predict the equilibrium price
and quantity utilising the demand and supply framework so as to understand the future
prospect of the coal mining industry of the state.
Australian coal mining industry price and equilibrium:
As per the report, price of the Australian mining export has tripled in the international
market over the last three decade and in addition to this, investment in the mining sector has
increased from 2% of the domestic GDP to 8% as of now (Latimer, 2018). This showcase the
sustainability and strength of the Australian mining industry and one of the main source of
the same is mining boom in coal mining of the state. Since 2003, Australian mining industry
has faced one of its largest coal mining boom and post Global Financial Crisis (GFC), during
2012 mining boom in the coal industry arisen for the second time allowing the production,
employment and price of the same to rise (Richter et al., 2018). survey, suggest that, rise in

3MICROECONOMICS
the coal mining boom has increased the real wage rate by 6% and reduced the unemployment
by 1.25% over the last two decade (Lenzen et al., 2016).
As it can be seen from the figure 1, Australian coal demand in the world market has
increased by a large extend and half of the same is sourced by Asian economies.
Figure 1: Coal demand in domestic market
Source: (Rba.gov.au, 2018)
Rise in the supply generally depicts a fall in the price, however, along with rise in the
price, there is rise in the demand as well. This can be depicted utilising the elasticity of
demand which tends to rise with flatter demand curve. Explanation of the same can be
perceived from the analysis of the demand and supply framework of the Australian coal
industry.