Free «About the Mining Industry in Australia» Essay Paper

The article written by Ellis Connolly and David Orsmond talks about the mining industry in Australia. More specifically, it talks about the reasons that made this industry experience rapid growth in 2000. One of the factors that contributed to the boom in Australian mining industry was an increase in its exports by about 300 percent. Steel, thermal coal, and oil were the main export products that were in high demand. Australia has huge reserves of iron ore, bauxite, gold, and copper. Due to this, it is among the largest producers and exporters of these commodities. During 1990s, the mining industry in Australia and Asia was weak. Asian financial crisis affected the consumption power of most countries in Asia. The global recession in 2000 caused most companies to shut down their operations since they could not cover up their operating expenditure. In 2001, the government of China started to encourage the establishment of steel making industries. This caused its economy to grow fast because it made the country urbanize and turn into an industrialized nation. China and India are large consumers of coal, which they import from Australia. Growth of commodity prices and the increased value of Australian dollar allowed the mining industry to earn significant profits in this country. Coal is the highest revenue earner in Australia followed by oil, gas, and, lastly, iron ore.

 

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This article also states that production and export of oil in Australia have been declining since 2000. This happened because most oil wells in the country have reached their maturity, especially those in Bass Strait and Western Australia basins. Major LNG companies that extract oil and gas are BP, Chevron, Electric and Tokyo Gas, and Osaka Gas. Oil and gas industries are the most capital-intensive mining industries in Australia. This is despite accounting for a small share of the overall mining employment. This industry reached its peak in 1980s and later in 2000s. The boom in 1980s was caused by discovery of gas in fields e.g. Gordon field, while 2000s boom was caused by new gas discoveries in western Australia. The country also considered starting the extraction of coal seam gas (CSG) after it discovered CSG reserves in Queensland.

Australia has a stable political environment. This encourages countries to enter into contracts of oil and gas supply with it. In addition, the country received support from Qatar for construction of North Dome gas field. Metal manufacturing industry has not been performing well compared to other mining industries in Australia. Weak performance was caused by high competition from smelters in China, which have big refines and, therefore, are able to lower their costs of production. During financial crisis in 2000s smelting companies such as BHP Billiton and Rio Tinto shut down their operations.

Mining operations in Australia contributed to the overall growth of the economy in the country. Mining boom in 2000 caused structural changes in Australian economy. This made real output of Australia to increase. Moreover, it has increased employment opportunities in Australia. This is because high profitability of the mining industry encouraged foreign firms to set up operations in the country. Therefore, employment opportunities in Australia increased. Boom in mining operations also encouraged migrants to move to Australia to search for jobs. Since most of mining fields are located in remote areas, workers in these fields are paid higher wages compared to other employees. During the mining boom, their spending power increased and this caused an increase of growth rate of Australian economy. Companies conducting their mining operations in Australia also pay royalties and taxes to Australian government. Income taxes and royalties paid to Australian government increased from 0.5 percent of GDP in early 2000 to 2 percent of GDP in 2009. The rise in taxes and royalties was mainly caused by the increase in prices and volume of Australia’s exports. Taxes paid by mining companies were used to provide social amenities to Australian people leading to improvement of their living standards. Dividends and retained earnings of most mining companies in Australia increased after the mining boom in this country. Part of the earnings was distributed to ordinary shareholders in Australia. Retained earnings were used to expand operations of companies engaged in mining and thus they provided more employment opportunities to people in Australia. Growth of mining industry also caused an increase in real exchange rates in Australia. The boom in mining industry also affected the states. The states that had the biggest amount of mineral resources developed more than the states that had fewer mineral resources.

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The article also compared the mining boom in 2000 with previous mining booms that occurred after the World War II. Mining booms in 1970s and 1980s were mainly caused by inflation due to wage fixing system that was adopted by Australian government. It also stated that Australian government had taken initiatives in 2000s to deregulate product markets to ascertain flexibility of Australian economy.

The research question stated on this article is relevant. The article aimed at investigating mining industry in Australia as it moved from bust to boom. The article is relevant since economists will be able to learn factors that made countries prefer importing mining products from Australia. In addition, this article shows economists how Australia was able to take advantage of Asian economic crisis that affected countries like Japan and China. Australia was able to improve its mining industry because its government formulated strict policies, which ensured that its exports were not affected by inflation. The authors also used credible sources to support their assertions. They used information from Australia global markets. This information is accurate, as researchers conducted extensive research before publishing information on Australian global markets. Authors also used financial information collected from banks. Banks maintain historical financial records. Information from bank publications is thus more accurate since it includes analysis of historical data. The authors also used a wide range of sources to support their assertions. They referred to books about mining industry, weekly publications on new products in the mining industry, and scientific journals. Due to this, the authors were able to get different opinions about economic issues ensuring that their claims were unbiased.

The research conducted by the authors is valuable since it creates new knowledge about the mining industry in Australia. It was able to point out new coal gas seam projects LSG that were initiated in Queensland. The study also outlined new CSG projects that were implemented in Western Australia and how they contributed to the success of Asian exports. The authors also showed how metal mining industry has been declining since 2000. The article proved the decline of metal industry by providing evidence of how mining companies such as Ravensthorpe nickel mine closed their operations due to low returns. It also provided new evidence on how mining industry in Australia improved economy of this country. It explained how job opportunities in Australia increased, how royalties and taxes strengthened economy of the country, and how more investment opportunities improved the overall economic growth. The authors supported most of their theories using statistical analysis. They used graphs on wage price index to explain changes in employment opportunities caused by the mining boom in Australia. They also used graphs on rolling annual average share to explain how employment opportunities were spread among different states in Australia. The authors also used statistics on percentage of nominal GDP in mining investment and compared growth in Australia with growth in countries such as India, Canada, United States, and South Africa. Statistical data helped ensure that all economic theories that authors used were supported by economic statistical data. This helped ensure that most of conclusions that this study arrived at were accurate.

This article had several limitations. The authors failed to address major issues while they were showing effects of mining boom in Australia. One of the major issues that they failed to address was how the increase in mining activities affected the environment in Australia. Mining affects the environment since it increases the level of pollution and makes the soil weak. This makes the soil vulnerable to being washed away by surface run-offs. Furthermore, coal combustion releases toxic gases into the atmosphere. It mainly releases sulphur dioxide and nitrogen oxide. These gases cause acid rains that increase the acidity of soils. The authors also failed to investigate whether Australian government was taking initiatives to reduce harmful impacts of mining in Australia. Most countries are substituting harmful chemicals used during extraction of minerals such as coal with harmless chemicals. In addition, most environmentalists argue that mining companies should take up initiatives of cleaning up abandoned mining sites. Abandoned mining sites are dangerous as people and animals can injure themselves when they fall into these sites.

The authors also failed to describe areas in their articles that needed further research. It is important for authors to indicate areas in their study that were not adequately covered so that future research could be carried out. Identifying areas that need future research is important since it helps researchers to determine any limitations that they encountered while formulating their research design. In this way, bias and weaknesses are eliminated from the study hence ensuring that the research process is both credible and reliable. Another weakness of an article was a failure to effectively describe methodology of the study. The sample population and its characteristics used in this study were not clear. Moreover, it was not clear which methods of data collection authors used to obtain data for analysis. Therefore, it is not clear what research design these authors used to conduct their study.