25 August 2014
Economists at the Reserve Bank have crunched the numbers on the impact of the mining boom. They’ve found that over the last decade it has lifted household incomes by 13 per cent, pushed wages higher and kept a lid on unemployment. It also triggered a spending spree on cars and electronic goods.
ELEANOR HALL: Economists at the Reserve Bank have crunched the numbers on the impact of the mining boom.
They’ve found that over the last decade it has lifted household incomes by 13 per cent, pushed wages higher and kept a lid on unemployment.
It has also triggered a spending spree on cars and electronic goods, as business reporter Pat McGrath explains.
PAT MCGRATH: It’s been credited for helping Australia avoid the worst of the GFC (global financial crisis) and keeping the economy out of the recession for more than two decades.
Yet for many Australians living in big cities, the mining investment boom has felt like a distant spectacle unfolding in the iron ore mines in the Pilbara and the coal pits of Queensland and New South Wales.
But now the Reserve Bank has quantified the impact of the boom on all us and Deloitte Access economic director Chris Richardson says it’s made some important findings.
CHRIS RICHARDSON: Almost 300,000 extra jobs in Australia, the population was probably 150,000 bigger than it would otherwise have been. Household wealth peaked at probably 17, 18 per cent higher than it would otherwise have been.
PAT MCGRATH: The RBAs economists say household incomes were 13 per cent higher last year than they would have been in the absence of the boom.
And they say it help to keep wages high, and the unemployment rate 1.25 per cent lower than it would have been otherwise.
CHRIS RICHARDSON: Basically the mining boom was a profit boom but when profits are higher the incentive to employ people is higher as well.
Each new employee is making more profits that he or she would otherwise have done in the absence of the mining boom so employers were out there employing people.
You saw that not just in mining, you saw it in construction for example. We have now in Australia one in every 11 workers in the Australia workforce employed in construction. We’ve never seen a percentage like that before.
PAT MCGRATH: But I suppose there’s always been some concern that the mining boom being centred as it has been in certain parts of the country – in Western Australia, in parts of Queensland as well – that the wealth being generated by that investment boom wasn’t trickling down. So do you think this could be taken as evidence that it was?
CHRIS RICHARDSON: Yes, look I think so. It’s too easy to think that the mining boom went to the miners, you know, either the companies themselves or the workers and so on. Far and away the big bulk of gains were to everyone else.
Think of big screen TVs. Thanks to the mining boom the Australian dollar went up so the price of big screen TVs went down, you know, that made in a sense everybody better off.
It allowed Canberra to finance a series of tax cuts – eight tax cuts in a row. Again, most tax cuts help, so although there were a bunch of benefits that people don’t think of as being driven by the mining boom they were there.
PAT MCGRATH: And it wasn’t just big screen TVs that Australians have been buying.
The high Australian dollar has helped to boost overall household consumption by 10 per cent, with a big rise in car sales.
But the high Australian dollar continues to hurt expert-dependent industries like agriculture and manufacturing.
And while the household incomes, the unemployment rate and wages are falling back into line as the mining boom subsides, the Australian dollar remains high.
Chris Richardson says that’s likely to extend the hard times for some sectors.
CHRIS RICHARDSON: That’s probably not down to the mining boom, it’s due to a bunch of other things, it’s what’s happening in the US and elsewhere as some of the artificial stimulus – you know, it’s not correct to call it money printing but let’s call it money printing – is wound back.
Things like that are helping to underpin the Australian dollar.
And it’s part of our problem that the mining boom, in particular mining prices – coal, iron ore, commodity prices – peaked back in 2001, you would ordinarily expect the dollar to have fallen more than it has by now.
Throughout 2014 however, those commodity prices have headed down and the dollars headed up that’s a tricky phase for the Australian economy.
ELEANOR HALL: And that’s Chris Richardson from Deloitte Access Economics ending that report from Pat McGrath.
Audio available here.
Courtesy of ABC News
25 August 2014