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Mining Boom Economic Commentary

Essay by   •  October 6, 2018  •  Essay  •  815 Words (4 Pages)  •  54 Views

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Introduction

The ‘mining boom’ was one of the largest changed on Australian economic shocks experienced during this period of many years. The international market for mining exports from Australia is more than three times higher than a decade ago, while investment spending in the industry has risen by 6% in GDP (Battellino, 2010). In the macro-economic direction, the prosperity of the mining industry has led to the improvement of people's living standards and the employment rate have decreased in the past years(TRADINGECONOMICS, 2017). The boom has contributed to a rise in the value of the Australian dollar in the mining industry. According to this article, the mining boom will have a significant impact on Australia's balance of payments, domestic economy and exchange rate.

The model

The impact of boom can be shown on the AUS-M model. Here, you can imagine, with the exception of the big exception, the short-term demand determines a lot of output. The main components of actual gross domestic product expenditure are shown on different timeline. The boom has led to two scenarios, first showing the evolution of the economy during the mining boom and, second, not bringing substantial changes to the economy. The pressures of prosperity can be determined by counter-facts and changes in the benchmark economy. The second scenario, based on the assumption that global industrial production is unchanged, has fallen to an average of between 1985 and 2000, with mining investment stability falling to 2 per cent of gross domestic product.

The boom in mining has brought growth to Australia's civil income, which is analysed through the impact of prosperity on the way people live. In recent years, domestic incomes have increased, leading to a rise in purchasing power and output, according to the survey. It is estimated that the mining boom has greatly raised the standard of living in Australia. It is estimated that in 2013, per capita disposable income will increase by 13%, real wages will rise by 6% and unemployment will rise by about 1% (Reserve Bank of Australia, 2013) The mining boom has also led to a sharp appreciation of the Australian dollar, putting pressure on trade and agriculture in other industries. The net effect is to increase real GDP by 6%. There are no huge differences in taxes, foreign income, and population. The mining boom affected procurement and led to demand shortages and deflation. All in all, the total demand is C + I + G + X - M.

Deals made by foreign investors make Australia's real income far more than expected. The Reserve Bank of Australia (2011) said the mining boom has had a significant impact on Australia's external accounts. The survey has resulted in an increase in goods and services as a result of the boom. An analysis of the economic model found that higher commodity prices and higher resource exports determine export earnings. Therefore, the growth of mining investment also provides a great impetus for imports. Australian resource export revenues have reached $47 billion in the past five years, up nearly 90% from the previous year. The rise in export earnings has led to a marked shift in the trade balance. The average deficit in the first half of 2000 was 0.5%, reaching the same surplus, near a 40-year high.

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