Can Australia handle an economic downturn? Failure to reinvest in mineral wealth casts doubt

Wealth from the mining boom has not been reallocated to benefit average Australians, leaving them worse off now than 10 years ago, analysts say

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A diamond mine in the Kimberley region of western Australia. Photo: Nature/AFP

Published: 11:00am, 12 Oct 2024Updated: 12:39pm, 18 Oct 2024

Australia’s reliance on natural resources to fuel its growth may be nearing a breaking point as a shifting global economy exposes the country’s failure to reinvest its mineral wealth into long-term prosperity, leaving average citizens worse off now than 10 years ago.

“Yes, we charge company tax and levy royalties for minerals, but we have been very generous to [resource extraction] companies,” Greg Jericho, chief economist at the Australia Institute, told This Week in Asia. “[But] we have very little to show from the sale of our natural resources.”

Once buoyed by the rapid growth of Japan and China’s surge into 21st-century prosperity, Australia now faces an uncertain future as Beijing shifts its focus from resource-intensive urban growth to high-tech manufacturing, weakening demand for the country’s mineral commodities, whose exports have underpinned Canberra’s economy.

Often referred to as a “nation builder”, mining has for decades been Australia’s largest export income earner: last year it generated a record A$455 billion (US$306 billion), about two-thirds of the country’s overseas income.

The politically powerful sector also enjoys considerable popular support, not least from “fly-in-fly-out” workers like Steve Parker, a “50-something” plant operator who earns A$250,000 a year working at an iron ore mine in Western Australia’s Pilbara region.

Excavators move iron ore in Port Hedland, Australia. Photo: Bloomberg

“Working away from home for three weeks can be tough,” he said after disembarking from a charter flight at Busselton, one of 60 each week that ferry workers between the picturesque southwest town and a dozen outback mines. “But then I get a couple of weeks off and the company treats me very well: good food, good accommodation, great money. Two more years of this and I can retire.”