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PERTH (miningweekly.com) – The Australian mining industry’s shift from an investment to a production phase would have a significant impact on the country’s economy, federal Secretary to the Treasury Dr Martin Parkinson said on Wednesday.
Speaking at the Association of Mining and Exploration Companies (Amec) Convention in Perth, Parkinson noted that the unprecedented investment, stemming from the mining boom, had been a major driver of Australia’s two decades of continuous economic growth.
“To meet demand from our trading partners, mining investment increased from less than 2% of gross domestic product pre-boom to almost 8% in the last financial year.
“This has seen the capital stock in the mining sector triple since the boom began,” Parkinson said.
He told delegates that an additional 180 000 workers had been employed in the sector, with several more jobs created in related industries.
However, Parkinson pointed out that Australia was now at a critical point in the mining boom’s evolution, adding that as commodity prices peaked in 2011, Australia was likely to have passed the peak of capital investment.
“We now find ourselves moving into another stage of the boom, which features rising production and export volumes, but falling prices and investment. Given the sheer magnitude of the investment boom, the economy will face some challenges in navigating this transition.”
The Secretary pointed out that in the short term, the net resources investment would shift from being a major contributor to economic growth, to becoming a detractor from growth.
Exports would increase as completed projects went into production, but Parkinson said that the net effect of these two forces meant that the Australian economy would become heavily reliant on other sectors outside of the mining industry, to return to a trend of growth, over the medium term.
He said that focus would need to shift to raising the productivity in the other economic sectors as a measure of guaranteeing economic growth.
“The shift in phase of the mining boom will result in a boost to our labour productivity as more projects come on line and move towards full production,” Parkinson added.
Some 16% of Australia’s current production is generated from the resources sector, and Parkinson said that this productivity turnaround would have a sizeable impact on national productivity. However, he warned that it would not lead to commensurate increase in income, as around 80% of the resource investment was funded from overseas.