The mining boom: impacts and prospects

Resources industry Power resources Economics Australia
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This report examines the fears some Australians have about the potential adverse consequences of the 10-year mining boom.


The biggest mining boom in Australian history since the gold rush of the 1850s is about to change shape. The investment phase of the boom, which has seen $400 billion invested in the last decade, is tapering off. The elevated prices paid for Australian mineral exports since 2003 are falling, and with them, the huge boost they provided to national income and government revenue. As these changes begin to transform the economy once more, this report assesses the benefits and costs of the boom, and points to what policymakers should and should not do next.

Overall, the boom has been good for Australia. It helped the country weather the global financial crisis. It helped fund major government initiatives. Most Australians have prospered.

But the boom has also provoked fears. Some worry that it has benefited mining states, companies and workers, but left the rest of the country worse off. Some believe that the high dollar caused permanent damage to trade-exposed industries such as manufacturing, tourism and international education. Some believe the boom will end in a severe recession. Others believe the Commonwealth Government mishandled the boom by failing to save much of the windfall it has generated.

This report shows that the first two concerns are largely unfounded. Certainly the boom has boosted incomes more in the mining states of Western Australia and Queensland and the Northern Territory. But in the past decade, incomes have increased faster across the country than in the decade before. Regions have grown at different rates but few are left worse off.

Benefits have been spread across the country as the boom helped to offset the impacts of globalisation and technological change on lower-skilled workers.

The boom has made life difficult for industries that compete internationally. Yet history suggests that manufacturing and other trade-exposed industries will bounce back quickly after the boom.

The concern about a possible recession is less easy to assess. There is a risk of a downturn: resources investment will decline, and falls in resource prices elsewhere were often followed by slower growth. But a recession is far from inevitable, and Australia has avoided the big traps in mining booms, such as high inflation.

The fourth community concern is well-founded. The Commonwealth Government has not saved enough of the proceeds of the boom. Tax decreases and spending increases have been larger than Australia can afford in the long run. Some spending was justified by the response to the global financial crisis, and some has been invested, but underlying budget deficits now need to be repaired in more difficult times.

Australian governments need to do more to tighten their budgets, which will permit them to respond strongly if the outlook darkens. Governments should resist temptations to protect industries, but continue to invest in skills and education to help workers and citizens respond to the changing risks and opportunities of a globalised economy. These will be even more important as the longest and largest mining boom in 150 years winds down.

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