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Boom, bust or business as usual?

08 August 2013

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Quentin Grafton is Director of the Centre for Water Economics, Environment and Policy (CWEEP) at Crawford School of Public Policy. In April 2010 he was appointed the Chairholder, the UNESCO Chair in Water Economics and Transboundary Water Governance.

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The heady days of the mining boom may be over, but the industry still has many productive high-volume years ahead of it, according to a leading expert.

Professor Quentin Grafton of the Centre for Water Economics, Environment and Policy at Crawford School, told ABC’s Bush Telegraph that over the last few years the mining industry has been growing volume output at a substantial rate, and it doesn’t appear to be slowing.

“If you go to the start of the mining boom, say 2002, about 400 million tonnes of product were coming out of Australia. We’re now running at 800 or 900 million tonnes and by 2020 it’ll be something like 1300 or 1400 million tonnes,” he said.

“That’s a huge volume increase that has already happened and will happen.”

Speaking on the same day that BHP Billiton CEO Andrew Mackenzie had predicted a strong future for mining in Australia, Grafton said that the industry operated with three distinct phases, and we’re a long way from the end of that cycle.

“The first phase is the price phase,” he said. “That’s when prices increase rapidly and that started in 2002. Prices fell with the Global Financial Crisis in 2008 /2009, then bounced up again – depending on the commodity – to peak in 2011.

“The second phase is the investment phase: mining companies making investments to increase their output. They do that, of course, because prices have increased dramatically – in some commodities six, seven or eight-fold – so they’re making a lot more money for product.

“The investment phase is almost certainly going to peak this financial year.

“The [final phase is] the volume phase, where you don’t make investments unless you can make a return. That phase won’t peak for several years yet.”

Grafton added that the challenge for mining companies, as well as other sectors of the Australian economy, had now shifted to increasing productivity.

“Incomes in Australia over the last decade have grown rapidly. Part of what happened was we had this big increase in prices that we benefitted from – it contributed about half of the income growth that we’ve had in the last decade.

“That isn’t going to happen anymore. We don’t have ever-rising prices. The only way we can maintain the growth in our incomes is actually to focus on productivity – that’s true for all sectors – so we can continue to get increases in income, because we can’t rely on ever-rising prices.”

To listen to the full interview go to:

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