Everyone knows that the mining boom led to record growth rates, enormous budget surpluses and historically low levels of unemployment — but was that really the case? The evidence suggests not according to David Richardson.
There is no doubt that the massive increase in exports associated with the mining boom and the record prices received for those exports had the potential to increase the living standards of all Austr alians, at least in the short term. But there is also no doubt that the vast majority of Australians missed out.
Two main factors prevented the benefits of the boom from trickling down through the rest of the economy. First, while the surge in mineral exports drove the exchange rate higher, the flipside was that it reduced the competitiveness of other Australian exports. The manufacturing industry, for example, was particularly hard hit.
The second difficulty facing the non-mining portion of the economy was that, in response to the minerals boom, the Reserve Bank of Australia was forced to put the brakes on via higher interest rates in order to offset the boom's inflationary effects.
It is true that a significant number of jobs, and well paid jobs at that, were created in Western Australia and Queensland but ABS data shows that most Australians didn't see the benefits of wages growth. Real wages increased at roughly the same rate after the onset of the mining boom as before it. Pensioners and households on government payments indexed to inflation missed out as well.
What about government revenue though? Once again, the official figures tell quite a different story from the common misconception. Despite the fact that the minerals boom was used as the justification for generous tax cuts by then Treasurer Peter Costello, a careful read of the budget papers makes it clear that, while the government experienced a tax bonanza in recent years, only a small fraction was attributable to the mining industry.
Overall, it seems that the benefits of the mining boom barely went beyond the mining industry itself. The beneficiaries were largely confined to those working in mining and related industries together with small numbers of investors that would have experienced increases in their wealth. This reinterpretation of recent history may not come as a surprise to the many Australian hou seholds who were left worse off, through higher mortgages and other borrowing costs.