How much does mining really contribute?

To believe some of what we hear lately, the Australian economy has hitched its entire fortunes to the profit margins of the big mining companies. Having once hitched a ride on the sheep’s back, Australians are now driving a monster mining truck to riches.

This is a convenient argument for mining companies who find, as the world is suddenly willing to pay a lot more for their product, they are being pursued by the federal government, on behalf of taxpayers, for a greater share of this windfall gain.

So what contribution does mining make to our economy? Would we be finished without it? Hardly. While mining continues to account for the vast majority of our exports – the income we earn from other countries – this pales in comparison to the income we create selling stuff and services to each other.

Of the total value of economic output, mining accounts for just 8.7 per cent. This is roughly on par with manufacturing’s share of 8.5 per cent, although manufacturing’s share has been dwindling for some decades.

The remainder of what we do is mostly services: healthcare, education, public administration, financial services. Three in four Australian workers make a living performing services for other people – mostly Australians. By comparison, mining employs 2 per cent of the working population, or 213,200 people at the latest count. For every miner, there is another person employed in the arts or what the Bureau of Statistics calls ”recreation” services, which includes people employed at sporting and recreational facilities.

And for every miner there are another six or seven people employed in the healthcare and social assistance industry – Australia’s biggest employer. This can only be expected to grow, as our ageing population boosts demand for health services and rising incomes enable us to devote a greater share of our spending on staying healthy.

Retailers are Australia’s second-biggest employer, providing 1.2 million jobs. So when David Jones and other retailers warn of tough trading conditions, this matters a lot for jobs.

Of course the mining industry, aside from its direct employment and income benefits, does create important ripple effects. Turbo-charged export prices have boosted mining profits and wages, which have in turn stimulated retail and services spending.

But that is an indirect way of spreading the boom. The government’s proposed minerals tax on iron ore and coal profits is designed to capture a greater share of the super profits being earned by mining companies. Industry argues this will force it to shift investments and jobs offshore, crippling the economy. Well, that’s 9 per cent of the economy, and 2 per cent of jobs.

Miners are up in arms about the government’s decision to put a price on carbon emissions, which will affect the coal industry directly. But once again, the potential impact on employment can only be small, relative to the number of Australians employed.

Perhaps the biggest and least understood trend in the Australian economy over the past few decades has been the shift away from primary production towards service industries.

We are a nation that makes a good living from the stuff we pull out of the ground. But most of us earn a crust using our minds and imaginations to provide services for others.

This entry was posted in Employment, Gillard Government, Mining Boom, Tax. Bookmark the permalink.

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