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Resource based or resource cursed? A brief (and selective) history of the Australian economy since 1901

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Robertson, P, Resource based or resource cursed? A brief (and selective) history of the Australian economy since 1901, Australian Innovation Research Centre Working Paper Series, Australian Innovation Research Centre, Hobart, Tasmania, WP/0108 (2008) [Magazine Article]


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Abstract

In contrast to the mythical Resource Boom of the early 1980s (Pagan, 1987), there is no doubt that Australian mineral production has increased greatly in recent years. The share of mining in Gross Value Added has risen from 4.4% in 2003-04 to 7.8% in 2006-07. By contrast, the entire manufacturing sector contributed only 11.2% of GVA in 2006-07 and is shrinking. The effect of the boom on exports is even more impressive. Minerals accounted for 62.8% of total exports in 2006-07. Taken together, the shares of iron ore and coal in total merchandise exports increased from 14.8% in 2003-04 to 24.3% in 2005-06. Only a few years ago, this scenario would have seemed improbable to some of the most knowledgeable observers of the Australian economy. In 2003, on the basis of both short- and long-term trends in the mining industry, Geoffrey Blainey contended that

By the year 2001 some of the vigour and puff had gone from the mining industry. After forty years of expanding and diversifying, mining became less dynamic. It remained the nation’s main source of exports but on most fronts it was no longer expanding. At the start of the new century the plans for new mines were few, and exploration was in sharp decline (Blainey, 2003, 388).

Nor, according to many observers, is the export boom in minerals likely to end soon, although it may level off. Kenneth Courtis, an expert on Asian economies, argues that the Australian dollar is ‘on a long-term strengthening course, on the back of a strong commodities export cycle that could run for 15 or even 25 years’ (Alford, 2007). These claims are not impossible since, even if growth rates in China and India moderate, the demand for raw materials will remain high.

These recent developments call for a reassessment of the structure of the Australian economy. It is not at all clear that the impact of the current boom will be similar to that of previous expansions based on the export of primary products, nor that an eventual end to the expansion will have similar consequences. The argument of this paper is that, although the nature of structural transformation in Australian was not entirely evident as recently as 1990, two major periods of adjustment since the 1920s have led to major changes. One important result is that earlier models of the economy are no longer reliable predictors of the likely effects of change (assuming that they ever were). Despite their dominating position in exports, primary products (including agriculture as well as mining) are no longer the major drivers in an economy that is much larger and more diverse than in the past. Nevertheless, elements of earlier patterns of development remain important as success in the primary sector still underpins Australia’s ability to service its substantial foreign debt. The intention of the paper is to expose some of the issues involved even though a thorough analysis of likely future effects cannot be presented here.

In the next section, I examine various export-based models of economic development, concentrating on the Staple Theories that have been widely debated in the past. This is followed by an examination of aspects of Australian economic history since the end of World War I, with an emphasis on industrialisation and then the rise of a services-based economy in more recent decades. Finally, a number of questions will be raised concerning the importance of structural change for future development.

Item Details

Item Type:Magazine Article
Keywords:Australia, economy, history, resource boom, export, economic development, foreign debt
Research Division:Economics
Research Group:Applied Economics
Research Field:Economic History
Objective Division:Economic Framework
Objective Group:Other Economic Framework
Objective Field:Economic Framework not elsewhere classified
Author:Robertson, P (Professor Paul Robertson)
ID Code:57085
Year Published:2008
Deposited By:Australian Innovation Research Centre
Deposited On:2009-06-16
Last Modified:2013-08-15
Downloads:11,936 View Download Statistics

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