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Australian Mining Industry

PART A: A Summary for ‘The Mining Industry: From Bust to Boom’

The paper provides an overview of the trends on the commodities that are produced and exported by Australia. The prices of these exports have increased by over 300 percent over the last four decades (Connolly & Orsmond 2011). This increase shows that the global supplies have not been adequate to beat their demand. The prices reached their lowest in the late 1990s when an oil barrel reached a low of US$10 per barrel in 1998, the lowest since 1974. Before the fall, the prices had stagnated in the 1980s and producers feared to invest in capacity expansions because of possible losses (Connolly & Orsmond 2011). Australia was adversely affected by the Asian economic crises and their best partners apprehended getting into business with them. During this period, the investment levels in Australia were relatively low. The global steel industry fell and this caused a highly significant drop in the demand and market for steel exportation from Australia.

The emergence of China as a major economy was not anticipated to be as quick as it has become. Between 1999 and 2007, the rise in the economic status of China rose to unanticipated. The emerging economic powers such as China have further seen their demand for energy shoot up during their development years. Their rate of industrialization and urbanization has been termed as above average after 2005 (Connolly & Orsmond 2011).

The Australian mining industry is endowed with a wide range of products that constitute of both energy and precious metals; and more is expected to be discovered in future. The industry faced major difficulties that forced many companies to move out between 2000 and 2005. However, the industry strengthened and accounted for over half of the total exports by 2010 (Connolly & Orsmond 2011). This advantage was however shifted towards the export of coal and iron ore and the switch from oil exploration to Liquefied Natural Gas (LNG), which had grown fast by 2010. During the later years of this decade, mining income rose from 6% to 14% of the total exports in Australia and consequently, the mining investment. Mining accounted for only 1% of the total national employment but has risen to 4% by the end of the decade. Production and exportation of the natural gas, iron ore and LNG is expected to continue rising.

Despite the growth in the mining industry, metal manufacturing has seen a lower growth in terms of employment. This clearly indicates the shift in the oil and LNG sector and less extraction of gold and base metals. The Chinese growth has caused the rise in demand in steel and energy where iron ore is an important input. This has increased the demand for iron ore from Australia as well as thermal coal that is used in energy production (Connolly & Orsmond 2011). Steel mills agreed to an 85% increase in price of iron ore from Australia due to the proximity as compared to Brazil. By 2009, China remained the highest producer, consumer and importer of coal giving Australia the advantage of proximity thus reduced shipping costs. More companies have invested in the iron ore extraction and exportation by 2009 which leads to the increase of Australia’s export of iron ore by 50% by 2015 (Connolly & Orsmond 2011). However, it has been noted that despite the increase in the oil exploration, there is a relative reduced focus of oil and an increased production of LNG.

Though Australia’s market in Asia are nearer to other cheaper oil producers, the global geopolitics has created an advantage over the others since the market countries have sought multiple choices for energy supply.

The mining boom that was experienced in the world economy affected very positively on the Australian economy. Different scholars have noted that such a boom has inevitable influence on any economy.  Heckscher-Ohlin-Samuelson framework notes that there are three sectors that determine the level of effects: the commodities under the boom, other tradables from the economy and the non-tradables. The framework identifies the direction and effect of the boom, but the magnitude is undefined since there are other underlying factors (Connolly & Orsmond 2011). 

Some of the identified direct effects of mining to an economy include direct labor usage, intermediate input usage for mining operations, tax and royalty payments dividends and retained earnings as well as increased foreign investment. The indirect effects include the increase in the real exchange rate and some effects on the inflation rate in the country. Mining booms lead to the equal distribution of resources to the regions within the country. There is also a variation in the other economic indicators in the country. The economic growth and employment rises while the rate of inflation reduces (Connolly & Orsmond 2011). 

Mining booms have always affected Australia because the country has experienced the same during the Second World War and the period between 1978 and 1981. The 2000-2010 boom was however the most economically beneficial of the three.

Part B: The Review and Appraisal of the Paper

This paper is written expertly, with a magnificent grammatical flow and accurate expressions. It exudes a great sense of professionalism due to the different research and structural aspects it carries. The best way to determine the quality of this paper is by looking into the information it contains. The economic appraisal and review will be done through the examination of the paper’s coverage of the Australian economic status with regard to mining industry. The data, its sources and its quality will be discussed. More importantly, the approval of the informational sources used in writing the paper will be examined to determine whether the sources are viable and reliable. Proper referencing of these sources will also be examined.

Economic Appraisal

The paper effectively examines the mining industry with the correct economic approach in the Australian economy. It first analyzes the mining status of the whole world as it attempts to bring out the comparison of the Australian status with the rest of the world. This is the correct way to approach such a research. It also gives a chronological unfolding of the situation in Australia since 1970s, giving the reader a proper background. This is regarded as the best way to study the performance of an industry, where the evaluation is done within a specified period of time and the trends of the performance plotted for a clear and easier interpretation.

Secondly, the paper provides a review of the factors that affected the world economy in order to relate it to the Australian market, during the period covered by the report. Such factors include geopolitics, especially in Asia, which directly affects oil and mining, competition from other economic powers such as China and Brazil as well as the continued fight for the superpower status in the world between China and the US. The economic growth of China, which is close to Australia, is also considered along with their production and demand for some minerals such as coal. China’s proximity to Australia provides the market for the minerals.

The paper also focuses on the position of mining in the generation of income for the Australian economy. The Australian Gross Domestic Product (GDP) and the contribution of the industry is deeply studied as well. Its contribution through the provision of employment which in the real sense determines the per capita income of the country is discussed. Further, the report examines the revenue trends as well as foreign investment into Australia. This has a well-rounded look into the different metals and materials that are mined in the country.

The report also looks into the quantities and prices of different minerals which gives it very reliable and authentic information regarding the economic situation in Australia. With regard to this, the country can align its resources in order of revenue generation where the more lucrative mineral would get more fund allocation.

Generally, the paper looks into all the effects that the mining industry has brought into the Australian market. Apart from the already discussed effects, the other ones include the intermediate input into the industry, taxation of the returns from the industry as well as the retained earnings and dividends.

Referencing and style

The referencing and appreciation of the original owners of borrowed data is well evident in the paper. It involves the in-text citation and the bibliography section. This is a very important aspect of any work as it shows professionalism and appreciation of the work that other people have done in the past. If data is borrowed and its author is not appreciated, a plagiarism offence is committed. The paper adheres to the correct style. One of the major weaknesses in the referencing of the paper is the lack of adequate in-text citation of the data that has been borrowed from other sources. A good example is the bulletin - Holloway J, I Roberts and a Rush (2010), ‘China’s Steel Industry’, RBA Bulletin, December, pp 19–25 - which has only had a slight mention in the paper. The footnotes are used in the paper to explain the references.

The names of the author and the year of publication in the bibliography are also not properly done because they have been put in bold.

Data quality and accuracy

The quality of data and information used in the paper is accurate and the sources are reliable. The author has used data from reports such as IEA (International Energy Agency), Productivity Commission of Australia report of 1998, Organization for Economic Co-operation and Development report of 2001, among others. These institutions that publish such reports are well authenticated and reliable. The author has used this data accurately and provided graphs and tables to explain trends and current status. This makes the paper reliable and worth using in other future studies.

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