Why is Mining in Australia so Popular?
Historically, mining has always been one of the backbones of Australia’s economy. But as other founding industries have become less relevant over time, mining continues to thrive.
Despite Australia seemingly embracing a technology and service based economy, mining is proving to be an exception to rule. But why is this the case? Why does mining in Australia continue to be so popular, not just for our own companies, but for international investors as well?
The answer is complicated, and involves considering more than just basic economics. Read on to learn about the complicated scenario that secures the importance of mining in Australia.
Mining in Australia is Big Business
Mining is the largest contributing sector to the Australian economy. Throughout the downturn of COVID-19 in 2020, it was one of only four economic sectors to record growth.
As of 2021, mining alone was responsible for 10.4% of Australia’s Gross Domestic Product (GDP). That clearly makes it the largest sector of the economy.
The exploration mining budget also increased by 38.8%, or $1.90B, at a higher rate than the global budget growth rate of 35%. This indicates that these numbers aren’t just being produced by existing mines, but that further mine exploration is a continuing – and growing – enterprise.
According to the 2022-2023 pre-budget submissions by the mining industry, these impressive numbers don’t stop there. In the decade between 2011-2012 and 2000 – 2021, the mining industry contributed:
- $2.1T in export revenue
- $132B in company taxes
- $106B in royalties
- $257B in capital spending
With a mining industry that is earning that much, it’s no wonder that Australia continues to rely so heavily on it to strengthen its economy.
The vast size of Australia, as well as its inhospitable interior, can cause a lot of logistical challenges. One thing it provides that isn’t challenging, however, is an abundance of valuable minerals and ore.
If you combine Australia’s current or late-stage mines and its known reserves, Australia possesses a large amount of the world’s minerals, gold and other precious metals.
Australia notably leads the world in production of:
- Iron ore (37%)
- Lithium (49%)
- Gold (10%)
- Cobalt (4%)
It also has several of the largest reserves in the world:
- Iron ore (30%)
- Zinc (19%)
- Cobalt (9%)
With such high levels of natural resources, Australia is in a lucrative position when it comes to mining. Whether it sells deposits to international companies, or domestic companies mine them instead, it boosts the economy either way.
Australia’s Geopolitical Position
Australia finds itself in a strange geopolitical position. As a former British colony, its cultural influences are still dominated by Britain and the USA. But as multiculturalism continues to grow, Australia’s culture is being increasingly influenced by its neighbours in the Pacific and Asia.
With wide scale conflicts decreasing, old-school military alliances have become less relevant, and trade relationships are becoming more relevant. This puts Australia in a unique position, where it’s culturally tied to nations on the other side of the world, but tied economically to its closer neighbours.
You might be wondering how this relates to mining in Australia?
Well, we’ve established that mining is Australia’s largest economic sector, so it stands to reason that the countries Australia exports minerals and ore to would be some of its closest trade partners.
The following are the top 5 nations that import minerals from Australia:
- Hong Kong
What do they all have in common? They are all Asian countries with large manufacturing industries, low natural resources, or both.
The reality is that mining exports are an essential part of Australia’s geopolitical defence strategy. Through maintaining reliable trade relationships with its closest neighbours, and allowing foreign investment into mining ventures, Australia has managed to carve out a niche for itself among some strange bedfellows.
It’s also worth noting that the pandemic crippled Brazil’s iron ore exporting industry, dethroning them as the largest iron ore exporter. Since then, Australia has emerged as the leading iron ore exporter in the world, which combined with China being the leading iron ore importer in the world, has further reinforced Australia’s need to produce iron ore.
Australia’s Labour Market
The benefits of mining in Australia are also felt in its labour market. Mining created 54,000 new jobs between 2010 – 2011 and 2019 – 2020. Over the same period, $246B was paid in mining wages. This job growth is sure to be replicated, and most likely exceeded, over the course of the 2020’s.
Low employment rates are devastating for any economy, especially through the pandemic. The mining industry helped maintain employment for countless Australian workers during COVID-19, and continue to stimulate employment in regional areas where there aren’t many other employment opportunities.
Mining also offers a range of employment roles. From unskilled labour to scientific analysis, it provides jobs for Australians across a number of education and skill levels.
Scientific Research and Development
Government funded research always aims to get a return on its investment. That’s why the Australian government prioritises mining technology research.
This has created a cycle where mining continues to be successful, which attracts research, which makes mining more successful, which attracts even more research.
The Commonwealth Scientific and Industrial Research Organisation (CSIRO) is currently funding extensive research in exploration, mineral processing, mining technology, sensing and environmentally sustainable mining.
The importance of efficient technology to make mining endeavours profitable cannot be overlooked, and Australia is a world leader in this space. With so much investment over a number of decades, it’s no wonder the government continues to invest heavily into mining research and development.
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