HI5003 Economics for Business: Australian Mining Industry in 2018

This report provides an economic analysis of the Australian mining industry, focusing on the impact of falling production and fluctuating demand on the country's GDP. It reviews an article highlighting the shift towards energy exports and the decline in mining output due to competition from count...Read More

Running head: ECONOMICS FOR BUSINESS
Economics for business
Name of the student
Name of the University:
Author note

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Table of Contents
Introduction:...............................................................................................................................3
Review of the selected article:...................................................................................................3
Affected stakeholders:................................................................................................................4
Economic representation of the chosen article:.........................................................................4
Recommendations to alter the present situation:.......................................................................5
Conclusion:................................................................................................................................6
Reference:..................................................................................................................................7

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Introduction:
Among all the mineral reach countries, Australia is one of the renowned one due to its
vast amount of storage of coal, iron and other base metals. On the other hand according to the
estimation, Australian mining industry produces almost 8.5% of the country’s total output
that let it provide substantial amount of growth to the GDP of the nation (Downes et al.
2014). In addition to this, it has also been seen that the Australian mining industry produce
almost 2% of the overall job in the nation that also contributes good amount of impact on the
nation’s economy (Bayari 2016)
Australian mining industry has started to change its dynamics since 2003, when the
firm mining boom came in and presently this industry has been suffering due to lack of
demand and various other issues, which is also deteriorating the country’s growth pattern
(Duke 2018). Under this context, this report is aimed to analyse the Australian mining
industry with the economic principles like supply and demand and next to this it is aimed to
provide recommendations depending upon its finding.
Review of the selected article:
Falling production of the Australian mining resources is hampering the country’s
economy, however rise in the Australian energy export has aided the economy to hold its
sustainability. Due to fall in the mining industry output Australian GDP has also detreated
over the time and at present it need to focus on the energy export as it has shown 6.9%
growth compared to the previous year (Duke 2018). Due to presence of the superior quality
of steel produced in china, Australian mining industry has faced high amount of drop in its
export in the last year and according to the selected article mining boom has been over and as
the days will past, it will hamper the country’s economy further (Palik, Kwon and Chen
2017). Thus the report suggests to move towards LNG projects, which has showcased great
amount of growth in the last year.

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Affected stakeholders:
According to the selected article, the major stakeholder of the Australian mines are
the owners and the workers as well as the executives. In absence of the mining boom
unskilled and semi-skilled labours has faced high amount of job loss during the present year,
which has affected their livelihood. On the other hand, due to fall in demand of the human
capital, skilled labours were forced to work at lower wage (Van, Walash and Behrens 2016).
Thus the whole labour market is affected by the fall in demand of the Australian mining
product demand according to the article.
Economic representation of the chosen article:
There are many economic ideas utilising which the mining market of the Australia
can be determined, however, one of the simplest model is the supply and demand, which is
the best suited economic framework for the same (Folland, Goodman and Stano 2016).
Demand and supply framework aids to determine the prevailing price and the quantity
demanded within the given input and in addition to this it aids the policy makers to frame
useful policies in order to gauge the present situation (Cowing and McFadden 2015).
Figure 1: Supply and demand framework of the mining industry

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Source: (Created by Author)
Considering the figure 1, demand and supply framework of the Australian mining
industry can be clearly understandable. Let, that the initial equilibrium occurs at point E1,
which represents the situation of the 2003, when the first mining boom came in. at E0, supply
curve S0 and the demand D0, equates with each other. At the initial equilibrium price was P1
and the quantity demanded was Q1. Next to this, as the demand started to fall in absence of
the mining boom, demand curve shifted leftward leading to a new equilibrium E2 (Johnson
2017). At the new equilibrium price was P2 and the demand was Q2, both of which were
lower than the initial equilibrium price and demand. However, during 2014, the Australian
mined faced another boom due to the availability of the tech-metals from the Australian
mines that enhanced the demand (Jartti et al. 2017). With rise in demand the demand curve
shifted rightward to the E3 position, where the price is P3 and the demand of the Australian
mineral ores were Q3 (Ruttan and Thirtle 2014). Both of them were much higher than the
initial equilibrium situation that highlights the better situation of the Australian mines.
Considering the article it can be seen that the, Australian mining is presently facing reduced
demand, thus the demand curve may shift downward again in absence of the strong
governmental intervention.
Recommendations to alter the present situation:
Considering the present situation of the Australian mining industry following
recommendations can be drawn:
 Under the deteriorating situation of the demand of the Australian mining products,
industry need to look into the other alternative source for its livelihood. As the article
highlights, shifting to the energy exportation rather than only focusing on the base
metal production, would be ideal for the Australian mines.

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 It has been observed that there is a huge amount of gap between the required labour
skill and the available labour skill. Thus, government should introduce institutes for
vocation and industrial trainings so as to enhance the number of human capital.
 It would be ideal for the government to utilise the magic wand of the export
promotion so as to compete with the aggressive Chinese export, which is engulfing
the large share of the international mining market from Australia.
Conclusion:
Among many essential factors are the falling demand of the Australian mineral ores in
the international market due to the rise of the Chinese export and in addition to this it has
become clear that the labour skill is in poor condition in the country. Analysing the
newspaper it has been found that the Australian economy has high potential to become the
largest producer of the energy export and thus according to the recommendation of the
researcher of this report, Australian mining industry look into this option too for its growth
rather than only focusing on the base metal production. Skill gap has been observed and it
need to be eliminated as soon as possible and to conclude it can be stated that the economy
need to utilise the vast amount natural resource available in the country in order to provide
growth to it.

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Reference:
Bayari, C., 2016. Economic geography of the Australian mining industry. Tijdschrift voor
economische en sociale geografie, 107(5), pp.552-566.
Cowing, T.G. and McFadden, D.L., 2015. Microeconomic modeling and policy analysis:
Studies in residential energy demand. Elsevier.
Downes, P.M., Hanslow, K. and Tulip, P., 2014. The effect of the mining boom on the
Australian economy.
Duke, J. (2018). 2018 ‘the end’ of resources boom as commodity price drops bite. [online]
The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/the-economy/2018-the-end-of-the-resources-boom-as-
falling-commodity-prices-bite-20180107-p4yyaa.html [Accessed 21 Apr. 2018].
Folland, S., Goodman, A.C. and Stano, M., 2016. The Economics of Health and Health Care:
Pearson International Edition. Routledge.
Jartti, T., Litmanen, T., Lacey, J. and Moffat, K., 2017. Finnish attitudes toward mining:
citizen survey-2016 results.
Johnson, H.G., 2017. Macroeconomics and monetary theory. Routledge.
Paik, Y., Kwon, J.W. and Chen, D., 2017. Global Business: Connecting Theory to Reality.
Taylor & Francis.
Ruttan, V. and Thirtle, C., 2014. The role of demand and supply in the generation and
diffusion of technical change(Vol. 21). Routledge.
van der Plank, S., Walsh, B. and Behrens, P., 2016. The expected impacts of mining:
Stakeholder perceptions of a proposed mineral sands mine in rural Australia. Resources
Policy, 48, pp.129-136.