Terrace MiningOn the back of record high commodity prices the mining industry in Australia is experiencing an unprecedented period of expansion. The value of our mineral exports has increased to the point where they now make up more than half of the value of all our exports. This increase combined with the huge inflow of capital to fund the mining expansion has been a significant factor in Australia’s rising exchange rate.

A higher exchange rate puts pressure on the non-mining sectors of the economy to remain competitive. Manufacturing in Queensland has declined 6.5 per cent over the past year and the number of international tourist coming to Queensland has fallen 6 per cent since the beginning of the mining boom as foreign travellers increasingly choose cheaper destinations. While some mining jobs are well paid, the reality for the 99 per cent of Queenslanders who don’t work in the mining industry is higher housing costs, higher mortgage interest rates and fewer jobs in tourism, manufacturing and agriculture.

In Queensland there are a large number of proposed mining projects that if completed will cause significant structural change to that State’s economy and Australia as a whole. Using Australian Bureau of Agriculture and Resource Economics (ABARE) statistics this paper examines the costs associated with 39 mining projects identified for Queensland.
These 39 projects together have capital expenditure of more than $55 billion and will employ an estimated 39,668 people. However, modelling for another mining project in Queensland, the China First mine located in the Galilee Basin, has shown that under generous assumptions one non-mining job will be destroyed for every two mining jobs created.

That is, it is possible that the proposed mining projects could destroy almost 20,000 jobs across Queensland and Australia. The majority of these job losses, almost 15,000, will be in manufacturing.
Significantly, such an approach is likely to be an underestimate as it assumes that the higher wages offered by the mining industry will convince a pool of almost 20,000 currently ‘invisible’ workers to enter the workforce. It is difficult to see how this can happen with the present tight labour market. It also ignores that the mining boom will continue to drive the high exchange rate which will cause further job losses in other sectors of the economy.

Research has shown that Australians overestimate the positive economic effects of the mining boom and little consideration is given to the economic costs. The mining boom will make large profits for the largely foreign owners of the mining companies and benefit those workers who are closely associated with the industry, but other Australian businesses and mortgage owners will have to contend with higher exchange rates and interest rates. While it is easy for proponents to talk up the benefits of individual mines, when they are considered together the overall impact is not as positive as the Australian public has been led to believe. The mining industry is quick to claim credit for job creation but is reluctant to take responsibility for any adverse impacts the expansion of their activities may cause.

March 20, 2012 Matt Grudnoff