How profitable is mining? According to the ABS, very profitable.

At the end of last month (May 28), the ABS published its annual “Australian Industry” release, which looked at a wide array of comparative industry performance measures for the Australian economy in the 2008/09 financial year. The results for mining are probably worth going over considering the hyperbole venting from some sections of that industry at the moment over the RSPT, particularly when it comes to issues of comparative industry profitability.

First off for some context, it’s worth looking at the number of people employed in each major industry sector in Australia at the end of last financial year, and the proportion of all jobs in the Australian economy that each of these sectors made up.

100616_possum1

Mining makes up 1.3% of all jobs in the economy. If we break the mining numbers down by state, this is what we get:

100616_possum2

However, while mining employs only a relatively small number of people, it does have a much larger total economic effect as a consequence of the way mining investment flows through the economy — the so called “economic multiplier” of mining.

This multiplier is fairly large. The Queensland government estimated in 2007 that the employment multiplier — the number of jobs created elsewhere in the economy for every job created in the mining sector — was about four. That is similar to the employment multiplier for the construction industry, so it’s probably a little on the high side since the input-output tables of the national accounts and the old input-output multipliers that the ABS once produced suggested that the construction multiplier was a bit higher than that of mining.

But whether it’s two, three or four — mining dollars spread far and wide through the economy.

(Though, looking at the partisan political angle for a minute — it’s interesting that the coalition is concerned about the negative effects of the RSPT in terms of the way the multiplier spreads the alleged impact of the RSPT through the wider economy, but ignore the same or larger multipliers that exist for the construction industry when it comes to the BER. But hey, this is politics and consistency has never been a particularly strong suit of the profession).

To read the rest of this article, head over the our Pollytics blog.

Peter Fray

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