HI5003 Economics: Mining Industry and Resource Boom Report

This report provides a comprehensive analysis of the Australian mining industry, focusing on its significance as a primary sector contributing to GDP, employment, and export earnings. The report details the key commodities such as iron ore, nickel, and gold, and highlights the impact of the resource boom since 2003. It examines the market structure of the industry, the factors contributing to the boom, and its effects on the mining sector, including increased investment, output, and employment. Furthermore, the report explores the broader economic implications of the boom, such as changes in per capita income, purchasing power, and the terms of trade. It also discusses government policies and their role in stabilizing the economy during the boom and its subsequent phases. The report utilizes figures and statistics to illustrate key trends and concludes by emphasizing the mining industry's vital role in the Australian economy.

Mining Industry and Resource
Boom
Name of the Student
Name of the University
Course ID

Introduction
• Australia Mining
• Important primary sector
• Contribute to GDP, employment and export earning
• Iron ore, Nickel, Copper, Aluminium, Gold, Copper, Silver, Uranium, Diamond,
Zinc, Opal and
• Resource boom since 2003.
• Terms of trade, exchange rate and increase in export demand
• Impact on Mining industry
• Impact on Australian economy

Background of Mining Industry
• Most well-established sector
• Accounts 7% of GDP
• Largely export oriented sector
• 50-60 percent of national export
• iron ore, gold, lead, nickel and zinc
• Western Australia, Queensland and NSW
• Value increased from $24 billion to $147 billion
• Expansion of mineral export
• Main export are coal and iron ore
Figure 1: Value of
mining industry

Market Structure of Mining
Industry
• Highly concentrated market
• Oligopolistic in nature
• Dominance of few large companies
• BHP Billiton, Rio Tinto, Xtrata, Shell, Woodside Petroleum
and Chevron
• Other small companies
• Similar to oligopoly market.

Resource Boom
• One significant event
• Began since 2003
• Increase in global commodity price
• Favorable terms of trade
• Increase in export demand
• Increase in investment in resource sector
• Price of iron ore increases to approximately $170 per tonne
• Price of thermal coal increased nearly to $180 per tonne

Impact of Resource Boom on
Mining Industry
• Expansion of resource sector
• Investment in coal, iron ore and LNG sector
• More important than previous boom
• Growth of bulk commodity export
• Increase in share of mining in GDP
• Increase in share of employment
• Highest expansion in the last 50 years.Figure 3: Statistics related to
mining industry in Australia

Impact of Resource Boom on
Mining Industry
• Rapid growth in revenue of
• Output expanded by 3 percent
• Employment is doubled
• Growth of capital stock
• Increase in demand of minerals
• Outward shift of the demand curve
• Increase in equilibrium price
• Increase in equilibrium quantity
Figure 4: Demand and
supply in the mining
industry

Impact of Resource Boom on
Australian Economy
• Overall positive impact
• Increase in per capita income
• Increase in purchasing power
• Increase in volume of output
• Higher investment in the mining sector
• Increase consumption and other spending
• Increase in terms of trade

Impact of Resource Boom on
Australian Economy
• Increased capital stock
• Real exchange rate increases by 44 percent
• Stronger employment
• Lower unemployment rate
• Higher price of energy
• Upward pressure in inflation
• Higher aggregate demand
• Increase in both GDP and price level. Figure 4: Mining boom and
effects on Australian
economy

Government Policy
• Policies to stabilize the economy
• Restrictive fiscal policy
• Economy received strong stimulus from resource boom
• Contraction in government expenditure
• Took away $50 billion
• Gather funds to spend during recession
• Recovery after ends of resource boom

Conclusion
• Mining: important sector
• Contribution in GDP and employment
• Significant contribution in export
• Expansionary phase since 2003
• Resource boom
• Growth of industry output and employment
• Positive impact on overall economy
• Higher GDP growth and higher inflation

References
• Chapman, R., Plummer, P. and Tonts, M., 2015. The resource boom and socio-economic well-
being in Australian resource towns: a temporal and spatial analysis. Urban
Geography, 36(5), pp.629-653.
• Eklund, E., 2015. Mining in Australia: an historical survey of industry–community
relationships. The Extractive Industries and Society, 2(1), pp.177-188.
• Ellem, B. and Tonts, M., 2018. The global commodities boom and the reshaping of regional
economies: the Australian experience. Australian Geographer, 49(3), pp.383-395.
• Gregory, B. and Sheehan, P. 2019. The Resources Boom and Macroeconomic Policy In
Australia. [online] Vu.edu.au. Available at:
https://www.vu.edu.au/sites/default/files/mcd/pdfs/AER No 1 Exec Summ.pdf [Accessed 18
Sep. 2019].
• Guilmi, C.D., Gallegati, M. and Landini, S., 2017. Interactive Macroeconomics. Cambridge
Books.