28 March, 2017
Courtesy of the AFR
The mining industry’s contribution to the economy is far larger and likely to be more lasting than most people believe, accounting for about 10 per cent of all jobs even in the so-called “post-boom” era now confronting the industry.
Research prepared by Deloitte Access Economics for the Minerals Council of Australia estimates how much of a gap would be left in the national economy without a mining sector.
Rather than counting only what is extracted by mining companies and sold offshore, it almost doubles the true contribution by adding in the sectors that contribute mining equipment, technology, and other services.
In 2015-16, the total contribution of the mining and broader so-called METS sector amounted to $237 billion, which is equivalent to around 15 per cent of the total economy.
The figure is considerably larger than what appears in the national accounts, where mining including oil gas accounted for about $116 billion of industry gross value added, or 7 per cent of the economy.
Deloitte estimates the industry’s broader contribution supports more than 1.14 million jobs across the country, or one in 10 full-time positions.
Ian Harper, a Reserve Bank of Australia board member who spearheaded the research at Deloitte, said the findings confirmed that mining remains a major player in the economy despite the industry now having slid into what is commonly referred to as the “third phase” of the resources boom.
The first was the surge in prices that erupted from 2003, followed by the record “investment phase” in new mines and capacity, and which ended around 2014-15.
Professor Harper said the report challenges a common misconception that the third leg of the boom – or the current rise in production and export volumes – will involve relatively few real jobs compared to the investment phase.
“It’s true that the first two phases have completed and now we’re into the third phase – but that is not a jobless phase,” Professor Harper said in an interview on Tuesday.
“If you just look at the raw figures, the extractive figures then you’re thinking this is relatively small, but that’s never been a proper way to do the numbers.”
‘Tip of the iceberg’
Professor Harper’s research excludes the oil and gas industry, which would make the contribution from the broader resources sector even larger if included.
“It isn’t just what share of value-added the industry has, that’s the tip of the iceberg.
“You ask what would the economy look like without this industry and that sweeps up all the interconnections that take place between pure extraction, which is what most people think mining is, and refining, and then you’ve got all the rest.”
By way of example, mining extraction adds about 0.5 per cent to Victoria’s gross state product, but when the METS sector is included, accounts for 3.7 per cent of growth.
“A lot of the activity which people don’t associate with the mining industry occurs in the big cities, which is where a lot of the METS sector is, so it’s a way to be able to explain to people that it’s not just minerals in remote areas of Australia,” said David Byers, deputy chief executive of the Minerals Council.
Mr Byers notes that the report provides a far more accurate picture of the durability of the sector because the calculations don’t include much of the construction activity that happened during the investment boom, and which would have inflated the figures.
“This is durable investment versus peaking investment,” he said.
Mr Byers adds that the report underscores the need for the government to ensure the industry remains competitive through the tax system, industrial relations flexibility, openness to foreign investment, affordable and reliable energy, and efficient regulation.