Analyzing the Mineral & Energy Boom's Impact on Australia's Regions

This essay examines the impact of Australia's mineral and energy resources boom of the 2010s on the nation's macro-economy and regional development, particularly focusing on non-metropolitan areas. It assesses the benefits, such as increased revenue for mining companies, infrastructure development, and improved terms of trade, as well as the pitfalls, including the higher value of the Australian currency impacting agricultural exports and stagnant real income for consumers in non-metropolitan regions. The essay also discusses whether mineral and energy resources development can create sustainable regional development, considering the importance of wealth redistribution, government policies, and private investment. It references various studies and reports to support its analysis of the economic effects and challenges faced by different regions during and after the mining boom.

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MASTER OF SCIENCE IN AGRICULTURE
TOPIC
THE AUSTRALIAN MINERAL AND ENERGY RESOURCES
‘BOOM’ OF THE 2010S POWERED THE AUSTRALIAN
MACRO-ECONOMY INTO A PERIOD OF RELATIVE
PROSPERITY. IT ALSO HAD DRAMATIC EFFECTS ON THE
AUSTRALIAN SPACE ECONOMY, WITH LARGE FLOWS
OF CAPITAL, PLANT AND LABOUR MOVING RAPIDLY
ACROSS THE NATION. FROM A REGIONAL ECONOMIC
DEVELOPMENT PERSPECTIVE, ASSESS THE BENEFITS
AND PITFALLS OF THE RECENT MINERAL AND ENERGY
RESOURCE BOOM FOR AUSTRALIA’S NON-
METROPOLITAN REGIONS. CAN MINERAL AND ENERGY
RESOURCES DEVELOPMENT CREATE SUSTAINABLE
REGIONAL DEVELOPMENT?

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Table of contents
1.0 Introduction..........................................................................................................................3
2.0 The overview of the Australian economy and importance of the mining boom..................3
3.0 The benefits of the mining boom in the nonmetropolitan regions of Australia...................4
4.0 Pitfalls of mining and energy boom for nonmetropolitan areas of Australia.......................6
5.0 Can the mining boom create a sustainable development?...................................................7
6.0 Conclusion............................................................................................................................8
Reference....................................................................................................................................9

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1.0 Introduction
The economy of Australia has been steadily increasing since the year 2001. Among the most
developed economies of the world, the economy of Australia is the strongest due to the fact
that it has shown a great resistance towards the global financial crisis which has dismantled
many of the global economies of the world. One of the biggest supports for Australian
economy during the global financial crisis has been the boom in the mining sector of the
economy. In the year 2010, the mining sector of the economy experienced a boom in the form
of more resource such as copper, iron and many more. Before that, the country was an
importer of these minerals which were used in any form of production. The mining boom of
the economy not only reduced the production cost of the economy, it also generated a huge
pool of employment for the people of the economy. According to Downes, Hanslow & Tulip
(2014), the job in the mining industry of the economy increased by 31% between the year
2010 and the year 2013. The corresponding policies and the strategies of the government
have also assisted the economy to enjoy the maximum benefits out of the opportunity the
country had. The objective of this study is to focus on the impacts of this mining boom on the
non metropolitan regions of the country. Through the analysis, the paper also answers the
question regarding the capability of the mining boom in ensuring a sustainable development
for different regions of the country.
2.0 The overview of the Australian economy and importance of the mining boom
The economy of Australia is one of the most well performing developed economies of the
world. In terms of the per capita GDP measured in PPP, Australia is third best performers
among the global powers. Apart from that, the overall wealth of the people of the country is
also very high. Per capita wealth of the nation is second in the world just after Switzerland.
Given these information, it is interesting to know that, the main source of income for the
people of the country has been the wage income. The service sector of the economy accounts
for a thumping 70% of the overall GDP of the country (Dwyer et al. 2016). Compared to that,
manufacturing sector of the economy has been mediocre in the past years. The economy of
Australia imported most of the manufactured products from foreign countries mainly from
East Asian countries. Therefore, the feat of the Australian economy to have a steady
economic growth rate over the years has been borne by the service sector.

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The mining boom that Australia experienced in the year 2010 increased the supply of the
natural resources which are extensively used in the energy production. As a result, more and
more foreign investors and companies started becoming attracted to invest in the Australian
manufacturing (Zhang & Moffat, 2015). The government at that time responded with more
liberal policies and reduced tax rate for the corporate and the consumers of the market.
Subsequently, the aggregate demand and hence the output of the economy increased
manifold. Most of the FDI inflow and new business development has been in the mining
sector manufacturing of the economy. The wage in the manufacturing sector increased a lot
following the increase in the output and the performance. As a result, more and more labours
across the country started to move into the mining and manufacturing industry that further
amplified the production level of the economy. Thus, the mining boom strengthened the
manufacturing sector of the economy where mining resources are used heavily. McLennan,
Becken & Moyle (2017) stated that the collective effects from the huge service sector of the
country and the emerging manufacturing sector ensured that the economy of Australia resist
the negative impacts of the global financial crises and grows steadily over the years.
3.0 The benefits of the mining boom in the nonmetropolitan regions of Australia
The most explicit and direct impact of the mining boom in the economy of Australia is the
increase in the revenue of the mining companies of the country. According to Fleming &
Measham (2015), the revenues of the mining companies of Australia increased by more than
$60 billion. This was available due to the high rate of investment both from the side of the
government and the foreign investors. However, it is important to note that, during the
mining boom of the economy the wage of the labours in the economy went up as well. This
reflected on the production cost of the mining companies. Nevertheless, the increase in the
revenue of the company outpaced the increase in the cost of production which eventually
increased the revenue of the mining companies (Basu et al. 2015). The mining boom
indirectly made it easier for the small businesses to start their operations in the mining sector
of the economy as well. The government ensured to extend credit to the private mining
companies for their hassle-free entry into the industry. In adaptation to that, the likeliness of
both foreign and domestic investors increased due to the fact that the mining boom had an
immense opportunity for the economy.
One of the notable benefits of the mining boom is that it compelled the companies to invest
their margin on the development of the capacity of the organisation. Fleming & Measham

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(2014) highlighted that the mining company owners understood that, the economies of scale
can reduce the cost of production which can further increase the profit of the company in the
future. This indirectly benefitted the local economy and the nonmetropolitan regions of
Australia. The areas of Australia such as Pilbara, goldfield experienced a rapid infrastructure
development fowling the boom in the mining industry of the economy. Most of the benefit
was accrued to the nonmetropolitan regions of the country due to the fact that, mining
locations of the country were far away from the urban areas.
The mobility of the labours in the mining sector resulted in a huge number of migration of
labours across the country. The populations of the mining locations and the nonmetropolitan
regions of the country increased significantly during the mining booms. As a result, the
government also spent a huge amount for the development for these locations as well.
Söderholm & Svahn (2015) highlighted that, post the mining boom era, the connectivity of
these regions to the metro cities of the country improved. Resource supply chain in these
nonmetropolitan regions strengthened during the mining boom in order to meet the needs of
the citizens of these areas. The burden of the government was minimised due to the high tax
payment to the local government of the area.
Furthermore, the terms of trade of the Australian industry improved over the years as well.
These terms of trade of the country indirectly influenced the income growth of the consumers
of the economy. Chapman, Tonts & Plummer (2016) stated that both the biggest sources of
income for the people of the economy, wage and the government support increased after the
onset of the mining boom. The high revenue of the mining companies of Australia improved
the tax revenue of the government of the country as well. As a result, the benefit payment to
the citizens such as unemployment benefits was increased. However, Robson (2015) in this
case criticised that, real income did not increase for the citizens and the labours of the
nonmetropolitan regions of the economy. The main reason for the stagnant real income for
the consumers of these is is the appreciation of the exchange rate. The high opportunity and
the economic expansion increased the demand for Australian currency during the mining
boom. Cheshire, Everingham & Lawrence (2014) also criticised the government for the
stagnation of the real income of the consumers of the economy. The nominal wage of the
labours increased manifold, however, the equivalent increase in the inflation rate made sure
the real income of the consumers remained same over the years. The reserve bank of
Australia during the mining boom increased the interest rates in order to attract more foreign
investment in the mining manufacturing sector and other sectors of the economy. However,

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this high-interest rate reduced the aggregate demand for the goods and the services of the
economy leading to a dampened output growth. Tulip (2014) noted that the nominal income
of the labours and the consumers of the economy would have risen more had the economy of
Australia managed to operate at the full employment level.
Another positive impact of the mining boom on the development of the nonmetropolitan
regions of the country is that it benefitted the resource owners of these areas. The resource
owners of land and labour in the nonmetropolitan regions of the country experienced a high
demand during the mining and energy boom. Chapman, Plummer & Tonts (2015) stated that
the income of the resource owners doubled within the first two years operation of the mining
manufacturing sector in the rural areas of the country. This is also the reason for the increase
in the wealth of the population of the country. One of the good things about the mining boom
is that the wealth development of the resource owners in the local areas was redistributed
accurately in order to spread the benefit. Infrastructure was developed in these areas with the
tax collectors and the royalty. The action of the government to improve the economy of the
local region further attracted foreign investors and new companies such as retail in the
nonmetropolitan areas. Thus, the employment in these areas not only grew in the mining
sector, it also grew in the other sectors such as IT and services as well. Bell & Hindmoor
(2014) highlighted that one of the biggest problems that the nonmetropolitan areas of the
country faced before the mining boom is the lack of private investment. Thus the mining
boom helped the development of the conditions in the nonmetropolitan areas through the
enhancement of wealth for the resource owners.
4.0 Pitfalls of mining and energy boom for nonmetropolitan areas of Australia
Despite the positive impacts of the mining and energy boom of Australia, there are some of
the associated events which hurt the interest of the people living in the nonmetropolitan areas
of the countries. One of the most important pitfalls of the mining and energy boom is the
higher value of the Australian currency. Gilberthorpe, & Hilson (2016) noted that Australia is
one of the key agricultural exporters in the East Asian markets. Thus, the rise in the value of
the Australian currency reduced the demand for the agricultural products produced in
nonmetropolitan regions of the country. The export reduced by 15% following the mining
boom of the Australian economy in the year 2010. In this context, it needs to be noted that,
most of the agricultural land of the country is in the nonmetropolitan regions of the country.
Thus, while on one hand, the mining boom increased the wealth and the income of the

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resource owners of these regions, it drastically affected the agricultural workers of these
regions.
Apart from that, regional disparities have also been resulted due to the mining boom of
Australia. Ivanova (2014) highlighted that regional policies of the local government resulted
in inequality in the economic conditions of different regions. In addition to that, the mining
boom only provided job opportunities in mining locations of the nonmetropolitan areas.
However, other nonmetropolitan areas as a whole failed to enjoy benefits out of the mining
boom of the economy. The regional disparity among different nonmetropolitan regions has
also been noticed in terms of unemployment. While the unemployment rate in the mining
locations reduced impressively, it increased shockingly in the other areas. Although,
Chapman, Tonts, & Plummer (2015) suggested that, government policies could have
managed the disparities, there was no action taken from the side of the government in order
to redistribute the gains among the nonmining locations. The difference also existed for the
private players of the agricultural companies. While mining locations such as Pilbara allowed
the agricultural companies to get easy access to business loans, small companies in other
nonmetropolitan regions of the country struggled to fund the operation. Therefore, the mining
boom paved the way for inequality and disparity among the different locations of rural
Australia.
Furthermore, labour market adequacy also resulted due to the mining boom of Australia.
Although the mining industry of the economy did not employ a huge number of labours, the
demand for skilled workers increased following the boom in the mining sector of the
economy. The skilled workers were as important as the investment inflow in the mining and
manufacturing sector (Bell & Hindmoor, 2014). This had its effects on the wages of different
labours of the market. While the skilled workers in the mining industry experienced a huge
increase in the average real wage rate, the unskilled labours associated with the mining and
energy manufacturing industry experienced a stagnant real wage. This also resulted in high
inequality among the people of the country. Dockery (2014) highlighted that the government
failed drastically not only to extract the most benefit out of the mining boom, it failed to
redistribute the gains among the citizen of the people of the country as well.
5.0 Can the mining boom create a sustainable development?
The economic contribution of mining boom of Australia has all the potential to create
sustainable development for the nonmetropolitan areas of the country. This is due to the fact

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that the benefits acquired from the boom are much more than the pitfalls. However, given the
weaknesses in the government policies, its potentiality can still be questioned. The
government of Australia needs to focus on the redistribution of the gains among the other
nonmetropolitan locations of the country. Furthermore, the development can also be
sustainable if the government takes care of the other sectors such agriculture. Equal loan
availability and reduction in the value of the Australian currency would enable the
agricultural sector to extract benefit as well. As a result, the service sector, agricultural sector,
and the mining manufacturing sector would contribute to the GDP growth and hence a
sustainable development for the nonmetropolitan areas of the country.
6.0 Conclusion
Thus, mining boom in the Australian economy overall improved the living standard and the
national wealth of the country. The boom in the mining sector not only improved the wages
of the labours in the nonmetropolitan areas but it also increased the income of the
government as well. This increased income of the government further which reflected in the
infrastructure development in nonmetropolitan areas as well. The tax of the local government
also amplified in the nonmetropolitan areas as well. Furthermore, private investment
increased in these areas enabling more opportunities for the new businesses. However,
despite its positive impacts, the mining boom of Australian economy also created a problem
for the nonmetropolitan areas as well. Economic disparity in terms of development and
unemployment is one of the concerns that might have reduced the intensity of the output
growth of the economy post the mining boom.

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