Effect of BHP Billiton Income on Australian GDP

Running Head: EFFECT OF BHP BILLITON INCOME ON AUSTRALIAN GDP
Effect of Bhp Billiton Income on Australian GDP
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1EFFECT OF BHP BILLITON INCOME ON AUSTRALIAN GDP
Executive Summary
The research paper intends to find out the impact of BHP Billiton’s income on Australia's GDP.
The complete research is based upon three research questions. The first research question
concerns with the overtime growth of the company. The second research question tries to find
significant influence of company's annual revenue on GDP of Australia. The third research
question is about the moderating influence of two other variables on GDP other than annual
revenue. The two other variables of concern are dividend payment and market capitalization.
Past literature was conducted focusing on influence of mining industry on GDP of Australia.
Studies concluded that mining sector in Australia has considerable impact on Australian
economy. During the period of mining boom the sector accounted a significant portion of GDP
and provides huge employment to the people. Annual revenue of a company affects GDP in
various ways. Different channel through which earnings of a firm influence GDP include
household and public sector expenditure, investment and net export. Dividend payment is part of
the profit paid to the company's shareholder. Market capitalization reflects total value of the
company’s outstanding share.
Time series data are collected on net profit, annual revenue, dividend payment, market
capitalization and GDP of Australia for a period from 2003 to 2017. After collecting the data,
quantitative method is used to analyze the data and draw conclusion.
Table of Contents

2EFFECT OF BHP BILLITON INCOME ON AUSTRALIAN GDP
1.Introduction...................................................................................................................................3
1.1 Problem Statement............................................................................................................3
1.2 Research aim and research question.................................................................................4
2. Literature review..........................................................................................................................4
2.1 Mining industry and GDP of Australia..................................................................................4
2.2 Annual revenue and GDP......................................................................................................5
2.3 Dividend payment and market capitalization........................................................................6
2.4 Hypothesis.............................................................................................................................7
3. Methodology................................................................................................................................7
3.1 Data collection.......................................................................................................................7
3.2 Data Analysis.........................................................................................................................8
4. Finding and Analysis...................................................................................................................8
4.1 Descriptive Statistics.............................................................................................................8
4.2 Bivariate Correlation...........................................................................................................11
4.3 Regression Analysis.............................................................................................................11
5. Discussion..................................................................................................................................14
5.1 Growth of BHP Billiton.......................................................................................................14
5.2 Hypothesis 1: Annual Revenue of BHP Billiton is significantly related to GDP of Australia
...................................................................................................................................................15
5.3 Hypothesis 2: There is a significant moderating influence of dividend payment and market
capitalization on GDP of Australia............................................................................................15
6. Conclusion.................................................................................................................................16
6.1 Addressing research aim and research objective.................................................................16
6.2 Limitation............................................................................................................................17
6.3 Recommendation.................................................................................................................17
References......................................................................................................................................18

3EFFECT OF BHP BILLITON INCOME ON AUSTRALIAN GDP
1.Introduction
The research report discusses how income of BHP Billiton, one of the top ten mining
companies in Australia effect GDP of Australia. The first section of the report includes research
background along with specific research aim and development of research questions and review
of past literature. The second part demonstrates chosen methodology for the paper, summary of
finding from the data analysis and draws strong conclusion from the conducted research.
1.1 Problem Statement
Resource sector especially mining and energy resources have undeniable contribution for
robust economic growth in Australia. The mining boom in Australia brought significant revenue
both to the federal and state government (aph.gov.au, 2018). The sector provides necessary raw
materials to the modern society. Mineral industry in Australia mostly covers exploration, mining
of different minerals and also the associated mineral processing sector. Mining sector alones
contributes nearly 8 percent of Gross Domestic Product in Australia. Australia holds one of the
positions among the top five mining producers in the world (Zhang et al., 2015). The primary
mining stuffs in Australia include iron ore, coal, alumina, tantalum, rutile, lithium, gold,
diamond, copper, silver and coppers.
The major mining companies of Australia are Adani Mining, Bechtel, BHP Billiton,
Cuesta Coal, Rio Tinto, New Mount, Yancoal and some others. Among these BHP Billiton
ranked as the largest mining company in world in the year 2017. BHP Billiton has considerable
contribution to develop Australia as a rich and prosperous economy of the world. The company
employ around 35,000 people Australia and pays a payment which is higher than the national
average wage. BHP Billiton remains the largest tax payers to the Australian government

4EFFECT OF BHP BILLITON INCOME ON AUSTRALIAN GDP
(bhp.com, 2018). Realizing the vast contribution of mining industry and in particular of BHP
Billiton, the present paper attempts to find the influence of BHP Billiton income on GDP of
Australia. Income effect of the company is modeled in terms of annual revenue earned by the
company. Besides annual revenue dividend payment and market capitalization are taken as
control variables and the moderating impact of these two components on GDP is evaluated.
Impact of these variables on Australian GDP are examined using time series data for last fifteen
years.
1.2 Research aim and research question
The current research paper aims to find out how income of BHP Billiton influences GDP of
Australia over time. The particular research questions that the paper addresses are as follows
 What is the trend growth path of BHP Billiton?
 How annual revenue of BHP Billiton alone influences Australian GDP?
 How annual revenue along with dividend payment and market capitalization influence
GDP of Australia?
2. Literature review
2.1 Mining industry and GDP of Australia
Mining includes exploration and processing of different mineral deposits of a nation. In
Australia, many of the mineral resources are unevenly distributed across different regions.
Western Australia for example is rich in iron ore and gas, New South Wales and Queensland are
rich coal and coal seam gas (Bjornland & Thorsrud, 2016) Australian mining industry
experienced a considerable structural shift during the since early 2000s. The growth in mining
industry source from a high price of resources resulted from a combination of high resource

5EFFECT OF BHP BILLITON INCOME ON AUSTRALIAN GDP
demand in from advanced economies and inelastic response from the supply side (Syed et al.,
2015). The higher resource prices created substantial opportunities for miming companies. The
investment and associated employment in mining sectors grew rapidly since 2011. Capital
investment in the sector as a share of Australian total rise significantly (Zhang, A. and Moffat,
2015). The long expansionary phase in mining sector is known as the period of mining boom.
The mining boom had considerable influence on employment and GDP of Australia. The mining
boom was larger in comparison to any other commodity boom in Australia. Since then mining
accounts a significant share in GDP of Australia. In terms of valued added, contribution of
mining in Australian GDP during 2011-2012 was 10 percent (Deephouse, Newburry &
Soleimani, 2016). The gross fixed capital formation estimated in prices of 2011-12 accounted 4
percent of GDP at this time. This was the highest contribution by a single industry in an
economy. Capital expenditure in mining was recorded 53 percent of private capital expenditure
valued nearly $82 billion. The gross value added produced by mining in Australia is
approximately $140 billion in 2012. Of this mining sector alone contributed approximately 90
percent (Howarth. Quaglia & Liebe, 2017) Rest of the value added was generated by exploration
and mining support services.
2.2 Annual revenue and GDP
Revenue of big companies contribute a significant portion of GDP of a nation. There are
several channels through which earnings of a company influence national income. A
considerable portion of firms’ income is contributed from household and public sector
consumption (Li, Zhang & Xiao, 2017) An increase in company’s earning thus represents an
increase in consumption expenditure from both household and government which constitute an
important part of GDP. Revenue of a firm also represents a sales and production of investment