1

Erdenebat, Fernandez

Erdenebileg Erdenebat, Ella Fernandez

Economics Club

25 Nov 2023

Impact of Natural Resource Exports on the Australian Economy

Australia plays a pivotal role in the global supply of valuable metals and stones, with its

primary international partners, especially China, driving its economic position on the world

stage. The nation boasts the second-largest accessible reserve of iron ore and the fifth-largest

coal resource globally. Additionally,

Australia maintains a substantial

surplus of natural gas beyond its

domestic requirements (Reserve

Bank of Australia). Over the past

century, the prices of these

commodities have surged, nearly

doubling Australia's terms of trade.

Given that these commodities are traded in Australian Dollars (AUD), the demand for AUD

has consequently increased.

However, the currency's appreciation has had adverse effects on other sectors (The

Guardian). A stronger currency makes the purchase of AUD in terms of other currencies

more expensive, resulting in higher costs for Australian exports and reduced demand. This, in

turn, adversely affects the efficiency of other industries engaged in international trade. The

phenomenon is akin to the "Dutch disease", where the boom in one industry leads to the
2
Erdenebat, Fernandez

decline of others (The Guardian). While excess investments have spurred growth in the

mining industry, sectors such as education and public health programs have lagged behind.

Despite the economic

expansion creating

more jobs, those

generated by the

mining industry

account for only 2%

of domestic

employment. Additionally, roughly 83% of the mining industry is owned by foreign

businesses (Australian Institute, 2012). Moreover, the heavy reliance on commodity markets

has left the Australian economy vulnerable to fluctuations in commodity prices. Most of

Australia's natural resources are exported to China, and during a recent economic contraction

in China, reduced imports caused significant economic damage. For example, energy export

incomes plummeted from $467 billion to $400 billion in 2023 (Australian Government). As

illustrated in the graph, the real exchange value of AUD fell approximately 35% over the past

10 months, a decline attributed by economists to the global economic contraction.

All this mining appears to have had a toll on the environment. Recent findings suggest that

the scale of methane emissions caused by mining has significantly increased over time. Even

with the efforts to mitigate the environmental impacts, the inevitable damage is taking place.

Australia is currently instating a program called “Efficiency Improvements and Fugitive

Emissions Capture”. This includes measures to reduce emissions from coal supply, include

efficiency improvements, and maintain high combustion efficiency at flares, gas engines, and
3
Erdenebat, Fernandez

related equipment (Ember). Despite these efforts, other aspects of the environment have been

equally as impacted –

including water and soil

quality as well as the life of

biodiverse animals (Alyssia,

2023).

While this sacrifice might be worth it from a foreign-export perspective, the internal

Australian economy is suffering. Industries such as agriculture, farming, and tourism are

heavily impacted by the environmental damage done by mining pollution (Australian

Institute, 2012). Additionally, businesses in the mining industry pay substantially less than

other industries, having a reported 7% difference. This further crowds out other industries

and limits their growth.

In conclusion, Australia is rich when it comes to the resources they can produce in their

mining industry. Their foreign relationships due to these exports have boosted their economy

in some respects but has damaged it in others. While Australian metals and stones are still

currently considered valuable and sought-after, the value of many others have been

diminished due to AUD inflation. Australian mining creates minimal job opportunities, and

those it does create are often temporary. Its pollution has affected many other industries, as

well as the country’s natural beauty. In an effort to appease foreign requests for materials,

Australia’s mining industry has left the country’s economy and environment in a worse state

than before.
4
Erdenebat, Fernandez

References:

Alyssia. “The Environmental Impact of Australia’s Mining Industry: A Comprehensive

Analysis.” Ecosustainable Hub - Ecology Environment Sustainability, 20 Apr. 2023,

www.ecosustainable.com.au/the-environmental-impact-of-australias-mining-industry-a-

comprehensive-analysis/.

Australian Bureau of Statistics. "Mining Operations, Australia, 2018-19." Australian Bureau

of Statistics, 2018,

www.abs.gov.au/ausstats/abs@.nsf/90a12181d877a6a6ca2568b5007b861c/

ce28d7fbe5faa308ca256cae0015da32!OpenDocument.

Australian Government, Department of Industry. "Australia's resources and energy exports

set to fall back in 2023-24." Industry.gov.au, www.industry.gov.au/news/australia-resources-

and-energy-exports-set-fall-back-2023-24.

Ember. "Tackling Australia's Coal Mine Methane Problem." Ember,

ember-climate.org/insights/research/tackling-australias-coal-mine-methane-problem/.

MINING THE TRUTH: THE REAL ECONOMIC IMPACTS OF THE MINING BOOM.

(n.d.). https://australiainstitute.org.au/wp-content/uploads/2020/12/MTT-

factsheet_FEB2013_4.pdf.

National Geographic Society. "Oceania Resources." National Geographic Society,

https://education.nationalgeographic.org/resource/oceania-resources/.
5
Erdenebat, Fernandez

Reserve Bank of Australia. "Australia and the Global Economy." Reserve Bank of Australia,

www.rba.gov.au/education/resources/explainers/australia-and-the-global-economy.html.

Reserve Bank of Australia. "The Reserve Bank's Role in the Foreign Exchange Market."

Reserve Bank of Australia, www.rba.gov.au/publications/bulletin/2013/mar/5.html.

The Guardian. "Here's why Australia's reliance on commodities is unhealthy." The Guardian,

14 June 2022, www.theguardian.com/commentisfree/2022/jun/14/heres-why-australias-

reliance-on-commodities-is-unhealthy.