RDP 2014-08: The Effect of the Mining Boom on the Australian Economy 6. Conclusion

We consider the mining boom as a confluence of events that have boosted world minerals prices and mining investment. This combination of shocks has boosted the purchasing power and volume of Australian output. It has also led to large changes in relative prices, most noticeably an appreciation of the exchange rate. The combination of changes in income, production and relative prices has meant large changes in the composition of economic activity. While mining, construction and importing industries have boomed, agriculture, manufacturing and other trade-exposed services have declined relative to their expected paths in the absence of the boom. Households that own mining shares (including through superannuation) or real estate have done well, while renters and those who work in import-competing industries have done less well.

All of these results are estimates that depend on linkages and assumptions which are open to debate. Some confidence can be placed in the broad pattern of responses we estimate, which is in line with previous research. There is less certainty about magnitudes and the timing of responses. Even if the model accurately captured the response of the Australian economy in the past, current and future relationships can be expected to evolve. Indeed, an important reason models like AUS-M exist is to allow users to explore alternative assumptions. But hopefully our analysis has provided a framework for thinking through some of the problems, and guidance about the relative importance of some of the main effects.