Using Top Down Analysis Of The Australian Economy Essay

1490 WordsSep 25, 20166 Pages
The world price of Australia’s mining exports has more than tripled over the past decade, while investment spending by the mining sector increased from 2 per cent of GDP to 8 per cent. This ‘mining boom’ represents one of the largest shocks to hit the Australian economy in generations. This paper attempts to quantify some of its effects, using top-down analysis of the Australian economy. It will show the mining boom has substantially increased Australian living standards. By 2016, we estimate that it had raised real per capita household disposable income by 13 per cent, raised real wages by 6 per cent and lowered the unemployment rate by about 1¼ percentage points. There have also been costs. The boom has led to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture. the development of horizontal drilling and seam fracturing or fracking technology has allowed the exploitation of coal seam and shale gas reserves that previously were difficult if not impossible to tap. At the same time, a combination of factors in Asian energy markets, particularly concerns over energy security, pollution and greenhouse gas emissions, has led to a demand for the sort of long-term contracts that have allowed commitments to be made to build the projects. The lower unemployment gap and higher oil prices that accompany the mining boom place upward pressure on inflation. However, these effects are initially more
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