The Australian Mining Industry: A Report on its Economic Significance

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Economics for business

Contents
Issues associated with the mining industry in Australia..................................................................3
Impact of issues on the mining industry of Australia......................................................................4
Impact of issues on the Australian economy...................................................................................4
References........................................................................................................................................5
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Issues associated with the mining industry in Australia
The mining sector of Australia is providing a significant contribution to the growth of Australia's
economy. In 2003 the prices for commodities like iron and coal are started rising and the reason
was increased in demand for China and other Asian countries (Keri, 2016). The price of thermal
cost contract increased by 70 % in 2004 while the coking coal price is increased by 120% as well
as the 70 % price of iron is increased in 2005. These were the highest prices of these products
during the resource boom phase. At that time the most important resources were the LNG,
thermal coal and iron which are produced by the mining industry (Battellino, 2010). Before
understanding the impact of resource boom on the mining industry and Australian economy it
should be understood that the mining sector faced three issues such as the increase in mining
industry investment and resource exports as well as the rise in terms of the trade that involves
multiplier effect from changes in income, exchange rate and expenditure. When the resource
boom took place in the mining industry no company anticipated in surge demand and
continuously raised the price of the commodities. The lower price of mining commodities and
mining investment were the two important issues during the resource boom. The demand for
LNG products got decreased and it declines the demand for iron ore product in china. Slow
demand for metal products also affected the mining industry production (Connolly and Orsmond,
2011).
Figure 1 BULK COMMODITY PRICES
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SOURCE: (Battellino, 2010)
Impact of issues on the mining industry of Australia
The increased price of the products encouraged the producers of mining companies to charge a
higher price from their customers In between 10 years the world price of mining exports is
tripled and the investment amount is also increased by 6 per cent from 2 per cent to 8 per cent
and the revenue of mining industry is also got increased. The mining industry output is increased
by an annual rate of more than 3 per cent. It has also achieved strong growth in the capital
market by doubling employment (Connolly and Orsmond, 2011). From 2003 the commodity
price of the mining industry has started rising that resulted in a decrease in multifactor
productivity and labour productivity. The mining industry highlighted two factors related to the
mining boom. First was the depletion of reserves for the commodity purpose such as copper and
coil decreased productivity factor as the companies in mining industry started using more input
by utilizing lower grade resources and the second one was long lead times among the output and
investment in new capacity (Battellino, 2010). The exchange rate in the mining industry got
increased with the resource boom issue. The export of mining industry is increased in japan
Australia and Germany in 2012-13. Mining industry received many resource projects to develop
new products. The volume of iron ore exported and extracted has increased at an annual rate of
more than 11 per cent. Coal production has also expanded and that resulted in the huge growth of
the bulk commodities. The mining of other ores like copper, lead, gold, zinc and nickel did not
perform well and the rise in LNG projects have seen in 2007 (Ministers, 2015).
Impact of issues on the Australian economy
The mining industry in Australia provided significant growth to the economy as the commodity
price of mining products raised and it increased the exchange rate. The resource investment in
mining sector provided an immense contribution to the GDP. The production and export of the
resource of the mining industry played a big role in the development of the economy. The
mining boom in Australia increased the per capita real income by more than 13 per cent and the
amount of wages is increased by 6 per cent (Battellino, 2010). The employment rate is reduced
by more than 1 per cent. The investment amount got increased in the mining industry and that
increased the GDP of Australia. There was a net increase in real income due to investment in the
mining industry. The domestic demand and export of mining products are also impacted by the
resource boom. There was 12 per cent of GDP in 2011 and 2012 but it got increased by 6 per
cent from 2016 to 2017. In 2017 the net impact of boom remained at about 5 per cent that was
reflected in a rise in export of resources (Downes et al., 2014). the mining industry in Australia
contributing more than 8 per cent to GDP of Australia and more than 60 per cent of total export.
The mining industry is employing more than 200000 people in Australia and also supporting the
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small businesses by providing a local supply of the products. Royalties and taxes received from
the mining industry are providing significant growth to the national and regional governments.
The mining boom also increased the living standards of the people in Australia by 2013
(Connolly and Orsmond, 2011).
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References
Battellino, R., 2010. ‘Mining Booms and the Australian Economy’, Address to The Sydney
Institute, Sydney, 23 February.Bureau of Resources and Energy Economics (BREE) 2012,
Mining Industry Major Projects April 2012, Canberra, May
Connolly, E., and Orsmond, D., 2011. ‘The Mining Industry: From Bust to Boom’, RBA
Research Discussion Paper No 2011–08.D’Arcy P and Gustafsson L, 2012, ‘Australia’s
Productivity Performance and Real Incomes’, RBA Bulletin, June, pp 23–35
Downes, P., Hanslow, K., and Tulip, P., 2014. ‘The Effect of the Mining Boom on the Australian
Economy’, RBA Research Discussion Paper No 2014-08
Ministers for the Department of Industry, 2015. Mining and the Australian economy: the
Australian Government's priorities for the mining sector Innovation and Science, online available
athttps://www.minister.industry.gov.au/ministers/frydenberg/speeches/mining-and-australian-
economy-australian-governments-priorities-mining last accessed on 9 September 2019
Phillips, Keri., 2016. The mining boom that changed Australia, online available at
https://www.abc.net.au/radionational/programs/rearvision/the-mining-boom-that-changed-
australia/7319586 last accessed on 9 September 2019
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