The RBA has a paper out today that is long and kind of boring for all but the wonks that concludes what intuitively we already know, the mining boom has contributed a lot to growth:
This paper quantifies the links from demand for Australia’s natural resources to activity in other domestic industries by using structural relationships embedded in input-output tables. Extending the methodology of Kouparitsas (2011), we estimate the size, growth rate, and industry value-added content of a broad measure of the ‘resource economy’, which is defined to include all final demand related to resource extraction and investment. Under certain productivity assumptions, we also estimate the amount of labour that is required by each industry to service the demand for Australia’s natural resources.
We estimate that the resource economy accounted for around 18 per cent of gross value added (GVA) in 2011/12, which is double its share of the economy in 2003/04. Of this, the resource extraction sector – which we define to include the mining industry and resource-specific manufacturing – directly accounted for 11½ per cent of GVA. The remaining 6½ per cent of GVA can be attributed to the value added of industries that provide inputs to resource extraction and investment, such as business services, construction, transport and manufacturing. This ‘resource-related’ activity is significantly more labour intensive than resource extraction, accounting for an estimated 6¾ per cent of total employment in 2011/12, compared with 3¼ per cent for the resource extraction sector.
This is no surprise but it’s good to put some figures on it. I would add that I reckon they significantly underestimated the effect of the boom because without it we would have experienced some form of current account crunch by now as Australian banks faced a borrowing cost squeeze offshore.
That is impossible to quantify but as a counter-factual is true nonetheless. Full study below.
