Mining News

Mining boom brings economic benefits to Australia

Posted by Cheryl Rutledge on 8/27/2014 4:51:10 PM

by Joshua Allsop and Kenneth P. Green

According to data published by the Reserve Bank of Australia, the country's decade-long mining boom underpinned a glut of spending on new cars and household durable goods, such as such as furniture, appliances, TVs, cameras and computers.

The study finds that the boom has contributed to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture. However, because manufacturing benefits so directly from mining within Australia the report goes on to demonstrate that the so-called ‘Dutch disease’ – was not strong.

Furthermore the report goes on to find that the mining boom has substantially increased Australian living standards. By 2013 the boom had raised real per capita household disposable income by 13 per cent, raised real wages by 6 per cent and lowered the unemployment rate by about 1¼ percentage points.

consumer spending and mining boom
Figure 1 - The Effect of the 'Mining Boom' on Consumer Spending (Data Source: RBA)

Purchases in those categories (as demonstrated by the study) were 30% and 20% respectively higher than what would have been without the so-called boom.

“The mining boom has substantially increased Australian living standards," conclude the paper authors, economists Peter Downes, Kevin Anslow and Peter Tulip.

The analysis shows there were two main factors driving the spending trend. First, a surge in household disposable income per person, which was 13% higher last year than if there had been no mining boom. Second, the increased demand for Australian minerals pushed up the exchange rate, making imported goods such as cars, TVs and computers cheaper for local consumers.

And that’s not all. If the mining boom never happened, Australia’s jobless rate would be 1.25% higher, the researchers found.

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