Resource Boom in Australia: Impact on Mining Industry and Economy

This presentation discusses the impact of the resource boom on the mining industry and the Australian economy. It covers the background of the mining industry, the market structure, and the impact of the resource boom on the industry and the economy. It also discusses the government policy during the resource boom.

Economics for Business
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Author Note

INTRODUCTION
• Australia: enviable amount of wealth
• Abandon stock of resources
• Raw material for most industries
• Minerals export comprises 35 percent of export
• World largest exporter of coal
• Nickel, copper, aluminum, silver, diamonds and other precious metals
• Resources boom started since 2003

MINING INDUSTRY’S BACKGROUND
• Several minerals, hydrocarbon and non-mineral reserves
• A well-developed mining industry
• Iron ore, gold, zinc, lead and nickel
• Contribute 50 to 60 percent of total export
• 7 percent of Australia’s GDP
• 370 acting mining sites
• Western Australia, New South Wales and Queensland
• Generates huge employment Figure 1: Exports of mining
industry

MARKET STRUCTURE OF MINING
INDUSTRY
• High concentration ratio in mining
• Concentrated among few firms
• 1300 mining companies
• Few large firms dominate
• BHP Billiton, Shell, Chevron and Rio Tinto
• Homogenous oligopoly market.
• Restricted entry: huge capital requirement.

RESOURCE BOOM IN AUSTRALIA
• Resource boom
• Most important event
• Began since 2003
• Favorable terms of trade and exchange rate
• Growing resource demand from emerging Asia
• Increase in global commodity
• Growing investment in resource sector
• Expansion of production and export Figure 2: Selected resource export
during resource boom

IMPACT ON MINING INDUSTRY
• Long standing implication for mining industry
• Mining related construction and business service expanded
• Mining companies benefitted significantly
• Enjoyed economies of scale
• Rapid increase in price of coal and iron ore
• Focus shifted towards these two sub sectors.
• Contribution to GDP increased

IMPACT ON MINING INDUSTRY
• Account 14% of GDP by end of resource boom
• Revenue increased
• Investment expanded
• Increase in employment opportunities
• Employment grew by 0.7%
• Mining output grew by 3%
• Increased demand, higher growth of the sector
Figure 3: Demand and supply
analysis of mining industry

IMPACT ON AUSTRALIAN ECONOMY
• Positive spill over effect
• Increase in living standard
• Increase in per capita real GDP
• Disposable income grew by 13 percent
• Gross domestic income grew by 6%
• Aggregate output expanded
• Increased capital stock

IMPACT ON AUSTRALIAN ECONOMY
• Capital stock boosted aggregate supply
• Real GDP increased by 6 percent
• Increase in aggregate employment
• Fall in unemployment rate
• Upward pressure on price
• Higher aggregate demand
• Higher GDP and price level Figure 4: Impact of resource boom on
macroeconomic equilibrium

GOVERNMENT POLICY
• Appropriate policy measure during resource boom
• Strong fiscal position
• Net debt: only 6.1% of GDP
• More restrictive fiscal policy
• Lower government expenditure
• Government withdrawn nearly $50 billion
• Fund to be invested during recession

CONCLUSION
• Mining industry: one crucial sector
• Huge stock of natural resources
• Contribute to GDP, employment and export earning
• Oligopolistic market structure
• Resource boom since 2000
• Favorable terms of trade, exchange rate, increase in global commodity
price
• Expansion of mining sector and the Australian economy

REFERENCES
• Bashar, O.H., 2015. The Trickle‐down Effect of the Mining Boom in Australia: Fact or
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changing landscape: Towards sustainability or business as usual?. Rural Society, 22(2), pp.111-
124.
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REFERENCES
• Measham, T.G., Haslam Mckenzie, F., Moffat, K. and Franks, D.M., 2013. An expanded role for the mining
sector in Australian society?. Rural Society, 22(2), pp.184-194.
• Mercer, A., de Rijke, K. and Dressler, W., 2014. Silences in the boom: coal seam gas, neoliberalizing
discourse, and the future of regional Australia. Journal of Political Ecology, 21(1), pp.279-302.
• Rba.gov.au 2014. The Effect of the Mining Boom on the Australian Economy. [online] Rba.gov.au. Available
at: https://www.rba.gov.au/publications/bulletin/2014/dec/pdf/bu-1214-3.pdf [Accessed 18 Sep. 2019].
• Rba.gov.au. 2019. The Resources Boom and the Australian Economy: A Sectoral Analysis | Bulletin – March
Quarter 2013. [online] Available at: https://www.rba.gov.au/publications/bulletin/2013/mar/5.html
[Accessed 18 Sep. 2019].
• Sheehan, P. and Gregory, R.G., 2013. The resources boom and economic policy in the long run. Australian
Economic Review, 46(2), pp.121-139.

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