Australia | May 15 2012
By Andrew Nelson
Speaking on the topic of "Developments in the Mining and Non-mining Economies", RBA Deputy Governor Philip Lowe said the Australian Mining & Resources sector now accounts for 16-17% of the nation’s economy.
Mr. Lowe first outlined how the RBA had over-estimated the level of growth we would see in the Australian economy last year. With help from Q1 CPI data, he figured the RBA has more room to ease monetary policy this year.
The prime cause of this miscalculation came from a slower recovery in coal exports and faster growth in Mining & Resources than the growth in the broader, non-mining economy. He pointed out that this caused a divergence in domestic demand, which in turn led to greater import intensity than forecast and thus less overall pressure on domestic capacity.
He then moved on to some recent data from the RBA about the overall proportion of the Mining & Resources in the Australian economy. NAB Senior Economist David de Garis points out that the RBA’s assessment is a much broader one than the ABS’s narrower definition based on strict industry classification.
The RBA data show the Mining & Resources sector is much larger part of the Australian economy than the ABS’s figure of a little less than 10%. Further, mining-related employment ads up to about 8% of the workforce, not the 2.75% the ABS has indicated, said Lowe. This is due to accounting for workers involved in other businesses related to mining such as construction, utilities, project management and so forth.
NAB Senior Economist David de Garis found these figures interesting, noting the RBA research demonstrated that mining activity grew 12% last year and is predicting a similar level of growth over the next couple of years. In fact, the RBA would not be surprised if mining employment accounted for up to 50% of total employment growth in the years ahead.
On these numbers, de Garis figures that non-mining employment would only have to grow at 0.75% – 1% in order to keep the unemployment rate steady and non-mining output at around 2% per year.
This leads de Garis to think that non-mining-related demand could actually grow a little faster than has been the case in the past few years. Thus despite the spate of recent easing talk of post this last RBA cut, de Garis expects only “a very mild monetary policy easing bias for now”.
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