Monday, August 25, 2014

The Effect of the Mining Boom on the Australian Economy

Researchers at the Reserve Bank of Australia published a discussion paper on the effects of the Austrialian mining boom.
This paper estimates the effects of the mining boom in Australia, using a large-scale structural macroeconometric model, AUS-M. We estimate that the mining boom boosted real per capita household disposable income by 13 per cent by 2013. The boom has contributed to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture. However, because manufacturing benefits from higher demand for inputs to mining, the deindustrialisation that sometimes accompanies resource booms – the so-called ‘Dutch disease’ – has not been strong.

More precisely, the authors use the method of creating counterfactuals from a baseline. The counterfactual is the case where no mining boom occurs, while leaving some variables unchanged (i.e. world economic factors) and others to adapt endogenously (i.e. Australian economic factors).

The paper has already found some media coverage see: Sydney Morning Herald [30% went to buying cars], and ABC

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