Think tank questions industry claims

Is the mining industry as important as it thinks it is? A new report doesn’t seem to think so.

A new survey, conducted by independent think tank The Australia Institute has found public perceptions regarding the size and significance of the mining industry to the Australian economy to be inaccurate.

The survey was conducted as part of a new research paper – Mining the truth: The rhetoric and reality of the commodities boom, which was launched by the Institute’s executive director Dr Richard Denniss at its annual conference in Sydney.

According to the survey, when they were asked to say what percentage of Australian workers were employed in the mining industry, the average response from members of the public was around 16 per cent, when according to the Australian Bureau of Statistics (ABS) the actual figure is 1.9 per cent.

The survey also found Australians believe mining accounts for more than one third (35%) of economic activity.

One again these figures were off the ABS mark, which show mining accounts for around 9.2 per cent of GDP – about the same contribution as manufacturing, and marginally less than the finance industry.

Denniss said expensive advertising campaigns produced by the mining industry had most probably contributed to the public observations.

 

“The mining industry likes to portray itself as a big employer, a big tax payer and a big money maker for Australian shareholders. Yet the reality just doesn’t match the rhetoric,” he said.

“The mining industry’s advertisements ignore the way that the mining boom is driving up the exchange rate, driving up mortgage interest rates and driving down employment in other sectors of the economy.

“It is a bit rich for former BHP Billiton chairman Don Argus to talk about declining productivity growth when an analysis of the figures actually reveals that productivity in the non-mining sectors is growing quite rapidly.

“The irony is that it is the rapid decline in productivity in the mining industry that is driving down the national figures.”

In the area of employment Denniss suggests the industry goes out of its way to, “ensure that employment in mining appears larger than official statistics suggest”.

To do this the industry refers to both direct jobs in the sector and to indirect jobs created upstream or downstream from the sector.

“The process of converting the amount of direct employment into a much larger number of direct and indirect jobs relies on the use of industry multipliers,” Denniss’ report states.

“ABS figures allow analysts to estimate the nature and extent of the interconnections between industries and, in turn, estimate the different multipliers for each industry.

“It is important to remember that the same ‘multiplier effect’ applies in virtually every sector; whether it is teachers, plumbers or miners spending their incomes, additional jobs will inevitably be created.”

Writing on The ABC Drum opinion web site Greens spokesperson for mining Senator Larissa Waters labelled the public’s perception of the industry to be, “a great public relations success”.

“Of course, mining likes to roll in all the indirect jobs it creates,” the senator wrote.

“If every sector calculated their share of the workforce in this way, the total number of Australian jobs would be inflated by three times the true number.”

On the Australian Mining – this is our story website, which is operated by the Minerals Council of Australia; the industry describes itself to be, “a key pillar of the Australian economy”.

It says the minerals resources industry is responsible for over six per cent of Australia’s economy and has invested more than $125 billion in Australia in the last 10 years.

“The mining industry’s contribution to the Australian economy is now $121 billion a year,” the industry site states.

“In terms of export income, it generates $138 billion per annum, which represents over half (54 per cent) of total goods and services.

“Across the nation mining employs 187,400 people directly, and a further 599,680 in support industries.

“In wages and salaries that amounts to $18 billion; an additional $21 billion is contributed through company tax and royalty payments.

“Not least, the industry spends $35.2 billion on new capital investment, $5.7 billion on exploration, and $4.2 billion on research and development.”

Dennis’ paper also claims the mining boom is blowing out the country’s account deficit saying the International Monetary Fund expects the current account deficit will reach 6.5 per cent of GDP in the medium term.

“It’s amazing to compare the rhetoric of the mining industry with the reality of the national accounts,” Denniss said.

“Not only is the mining boom reducing the competitiveness of other exporters but the enormous outflow of profits to the foreign owners of the mining companies is driving up the net income component of the current account.

“It might seem bizarre, but Australia is set to simultaneously experience a mining boom and a blow out in our current account deficit.

“The mining industry is in the middle of planning massive further expansions. But the faster the expansion of the mining industry, the lower the level of employment in other industries will be.”