The end of Australia’s largest mining boom, an event that has enabled the country to go an astounding 23 years without a recession, is near. As the price of iron ore continues its year-long downward slide, and China’s demand for minerals and metals follows the same trend, many experts have started looking back to see just what kind of mark the mining boom has left on the business landscape of Australia – for better or worse.
National Farmers Federation: It Wasn’t All Negative (But a Lot Was)
This week the National Farmers Federation (NFF) shared that the mining boom actually did bring some benefits to agriculture. Farmers saw the benefit of region infrastructure, which probably would not have been constructed otherwise.
It was widely known throughout the mining boom that the agriculture industry was the main sector to suffer at the hand of mining’s success. It pushed the value of the Australian dollar up substantially. Ideally the sector would have liked to see it stay between 60 to 70 US cents to the Australian dollar, as “farmers would have got a much bigger pay cheque in Australian dollars," said Alan Langford, chief economist with Bankwest.
But agriculture wasn’t the only industry that saw difficulties brought on by the high Australian dollar. Langford mentioned, in his response to a report published by the Reserve Bank of Australia, that tourism on the Gold Coast has felt the same lingering effects of the boom.
Tony Mahr, general manager of policy with the NFF, shared his view on the issue: “"If you take a step back, the mining boom has had broader benefits for the economy outside of agriculture, so there's a balancing up of that impact also. But there's no doubt there'd be those in the community, and I agree, who say the high Australian dollar hasn't been good for agricultural exports."
How the “Boom” Was Spent
The Reserve Bank of Australia also published an infographic regarding how the money from the mining boom was spent. The biggest chunk of the pie went to motor vehicle purchases, which were 30 percent higher during the boom than purchases would have been otherwise. Perhaps a not-so-subtle indicator that the mining boom is indeed over has been the announcement of a mass exodus of the car industry from Australia.
The purchase of “durable goods” – household items – was 20 percent higher than it would have been without the boom.
These and the other statistics can be explained rather simply: for the most part, the mining boom boosted a majority of Australians’ incomes.
"We find that the mining boom has substantially increased Australian living standards," read the Reserve Bank research discussion paper, titled The Effect of the Mining Boom on the Australian Economy, written by economists Peter Downes, Kevin Anslow and Peter Tulip.
What Happens Now?
Some optimistic analysts are expecting a relatively easy way out of the mining decline. A major part of this optimism stems from the knowledge that the major LNG projects that have been built up during the mining boom have yet to be switched on. With their exports expected to triple from 2016 to 2020, the ramp-up in exports will be pretty much locked in. A major part of the equipment that was used in the construction of the mine expansions and the LNG projects has already been sourced abroad. Government debt is low – by global standards anyway – and analysts remain largely optimistic about the country’s exports to Asia.