Australian Mining Industry: Issues and Recommendations

This report analyses the issues faced by the Australian mining industry due to the fall in demand of its mining goods and services in the international market. It provides recommendations to gauge the deteriorating situation of the Australian mining industry.

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Introduction:
Australian mining industry is one of the essential sector of the country’s economy that
contributes substantial amount of growth to the total output of the economy. According to the
latest data, mining industry of the country shared almost 8.5% to the country’s GDP and it is
accounted for approximately 2% of the employment of the economy (Ellis 2018). This highlights
the importance of the mining industry to the Australian economy. However, over the time there
has been various fluctuation in the Australian mining industry that has provided crippling blow
to the economic structure of the mining industry. Since the last two decades, Australian mining
industry has faced two booms, which took place during 2005 and 2014 that has provided it to
become the essential part of the country’s economy with high amount of job creation and
enhanced share to the GDP (Campbell and Withers 2017).
Under this scenario it has become important to consider the case of the Australian mining
industry and portray how it has performed in recent days. In order to provide clarity to the
research, the report will consider a latest newspaper report regarding the Australian mining
industry and assess the issues related with the Australian mining industry in present day with
special focus to the issues faced by the stakeholders. In addition to this, the report will consider
the demand and supply framework in order to portray the economic framework of the mining
industry and analysing the same it will provide various recommendations to gauge the present
situation of the Australian economy. To conclude the report will provide a summarised overview
of its findings and portray.
Main issues highlighted by the article:
Australian mining industry has been going through turmoil in recent days due to the fall
in the price index of the country’s mining product in the international market due to the fall in

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the demand. The selected article was published in Sydney Morning Herald with the headline
“2018 ‘the end’ of resources boom as commodity price drops bite”, which suggests that the
mining boom of the 2014, has been driven by the tech metals (Duke 2018). However, during post
mid quarter of 2017, there was drop in the demand of the tech metals that has posed turmoil on
the economy of the nation (Dungey et al. 2017).
Figure 1: Australian mining industry growth
Source: (Tradingeconomics.com 2018)
According to the figure 1, it can be seen that there has been various turmoil in the mining
industry of the Australia, however apart from GFC situation, according to the trend present fall
in the mining industry of the country will be pathetic for the economy (Tradingeconomics.com
2018).

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Figure 2: mining industry capital expenditure
Source: (Duke 2018)
Figure 2 highlights the capital expenditure in the mining industry of the country and it
has been fell by 12% compared to the last year (Duke 2018). In this situation, the article suggest
to shift to the production of the LNG production, which can provide stimuli to the Australian
mining industry.
Affected stakeholders:
Mining industry of Australia holds paramount importance to the country’s economy. As
it has earlier mentioned it provides almost 8.5% of the country’s GDP and it provides highest
amount of employment that makes it one of the essential sectors of the economy (Anderson
2017). With vast amount of employment, which is as high as the 220,000 people mining industry
generates highest amount of job in the Australian economy every year (Parker et al. 2017). In
addition to this, it has also been observed that the mining industry has helped the economy to

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withstand against the market shock in several instances. This highlights the importance of the
mining industry to the Australian economy. Considering the selected article it has been observed
that Australia has been running out of its mining boom that took place during 2014 with the
exploration of the tech metals from the mines of the country (Bakker and Shepherd 2017).
As the article posted back in 2016 in the ABC news opined, mining boom of the country
has been driven by the tech metals and the latest report highlights it sustained only till 2017
(Adler et al. 2017). Considering the selected article it has been found that major portion of the
affected stakeholder of the fall in the mining price index is the employees as well as the owners
of the mines. In addition to this, it has also been seen that other than the employees and the
owners, fall in the mining price index and loss of production of the mining industry has affected
the economy of the nation as a whole. According to the selected article it has been found that the
unskilled and the semi-skilled employees of the mining industry has lost huge amount of jobs. As
the (Duke 2018) argues, there are more than 50,000 job loss during 2017 due to lack of demand
of the Australian mining industry goods and services in the world market.
In addition to this, reduction in the demand of the Australian iron ores has caused fall in
the wage rate of the skilled labours. Thus irrespective of the level of expertise, overall labour
market of the Australia has been hampered due to the recent fall in the mining output. On the
other hand it has been found that the various mining firm has found themselves on the verge of
shutting down the business due to the presence of low demand in world market (Yakovleva
2017). Rising demand of the Chinese dominance in the international mineral market has caused
the incentive of the Australian mining industry. In addition to this, the selected article highlights
that due to fall in the price index of the Australian mining industry through the fall in the demand

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of the Australian mineral ores in the international market, it has affected the overall economy
negatively.
Economic interpretation of the selected article:
It has been observed that the mineral exploration trend over the year of the Australia has
been falling and most reduction has been observed in the case of the iron due to the presence of
Chinese aggression in the international mineral market.
Figure 3: Australian mineral exploration trend over the year
Source: (Abs.gov.au 2017)
Considering the present situation of the Australian economy it can easily be described
with the supply and demand framework, which is one of the simplest economic model (Zoutman,
Gavrilova and Hopland 2018). As the figure 1, highlights, initial price of the Australian mining
products is P1 and the quantity demanded is the Q1. Now as the economy has been facing reduced
demand the demand curve has been shifted to D1 position, where the price is P2 and it is lower
than the initial equilibrium situation.

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Figure 4: Supply and demand framework of the Australian mining industry
Source: (Created by Author)
As the elasticity of the mining products are higher, lower price will enhance the demand
of the mining products of the Australia. Considering this, as the economy moves forward and the
Australian mining industry moves towards the production of the LNG, demand will rise leading
to shift the demand curve to rightward to D2 (Duke 2018). At this new equilibrium situation the
price of the Australian mining goods will be P3 which is higher than the equilibrium price.
Other relevant issue highlighted by the article:
Selected article highlights that the Australia can play a key role in the world energy
sector through supplying the LNG. The article highlights that according the estimation of the
International Energy Agency Australia can direct the international energy market and by the end
of the 2018, it is expected to earn more than 14 billion dollars, while there will be reduction in
the revenue from the coal and iron ore export by 10 billion dollar and 11 billion dollar
respectively (Duke 2018).

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Figure 5: Australian energy and resource export volume and value
Source: (Duke 2018)
As the figure 5 highlights, Australian energy export volume has been raising at a steady
rate over the year. Since 2008, resource export volume has enhanced by almost 300% and the
value has also enhanced by substantial amount (Miller et al. 2018). In addition to this the report
has highlighted that by the end of the 2023 there will fully operational large scale iron, gas and
coal projects, which will be responsible for enhancing the production of the mining industry of

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the country by one third portion.
Figure 6: Australian energy and resource export growth
Source: (Duke 2018)
As the figure 6 highlights there is high amount of growth in the Australia’s energy sector
that can provide much amount of boost to the economic importance of the energy sector. During
the year 2017 it has been observed that energy export has contributed 20% growth to the value of
the Australian mining industry and as per the forecast in the coming years it will provide 5% rise
in the value of the Australian mining industry output (Solminihac, Gonzalesand Cerda 2017). In
addition to this, the article highlights as the export growth of the Australian iron ores are falling
it can shift to the base metals like zinc, which is facing high amount of demand in present date in
the world market.
Recommendations to gauge the situation:
Australian mining industry is such an organisation of the economy that possess
paramount amount of importance. However, recent fall in the demand of the Australian mineral
ores has provided a crippling blow to the overall performance of the economy. Thus, in order to

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gauge the deteriorating situation of the Australian mining industry some of the recommendations
are mentioned below:
 It is paramount importance to the Australian government to reduce the skill gap among
the labour force of the country. Share of the skilled labour out of total labour force is still
low that has been constraining the economic growth as well as the mining industry
growth in the country.
 Next to this, Chinese mining industry has taken aggressive stance to absorb the major
share of the international mining market through price cut, superior product and
continuous flow. Thus the Australian government need to produce superior quality
mineral and provide required exposure to the export sector of the country.
 Export promotion and import substitution can become helpful for the economy to achieve
sustainability in the mining industry.
 It has been argued by the selected article that the Australia has high potential to become
the market leader of energy exportation. Thus the government need to absorb the same
wholeheartedly and provide the industry much needed big push.
 From the supply and demand framework it has been found that there is substantial
amount of drop in the demand of the Australian mineral in the domestic as well as the
international market. Thus it would be ideal for the Australian mining industry either to
focus on continuous focus or it can shift to alternative goods and service sector through
utilising the energy sector channel.
Conclusion:
From the above analysis it has been found that Australian mining industry is one of the
essential sector of the economy that provide much amount of employment as well as stability to

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the economy. The analysis has showcased that due to the backing of the mining industry in case
of the global recession, Australian economy has sustained itself largely. The economy has faced
mining boom in various occasions, however presently it has been found that the economy has
been suffering from the lack of demand of its mining goods and service in the international
market. As the analysis moves forward, it has been found that one of the major reasons for the
fall in the demand of the Australian mining goods and services, is china’s aggressive pricing
policy as well as production of superior quality iron ores.
Thus, the report has found that selected article has provides substitute source production
for the Australian mining industry and utilising the same it has opined that Australia can become
the market leader with the energy export. To complete the analysis, the report has provided
recommendations, which within its limited framework aims to provide much amount of push to
the Australian mineral industry. Thus to conclude it can be seen that though the mining boom of
the country has over due to lack of demand of the tech metals, Australian mining industry can
rise again with the help of the enhanced export of the energy sector. It can provide the economy
sustainability as well as let it growth with a rapid speed through promoting higher amount of
demand.

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References:
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