Australia has enjoyed a long and profound economic boom courtesy in large part of our mining sector. As that boom starts to come to an end, it is vital that we stand ready not just to embrace new booms, but to create them. This is a task that our home state has already undertaken, with great success.
The multi-billion dollar Australian mining investment boom is holding true to typical business cycles, with the inevitable reduction in the size of the industry drawing closer. Up until around 2012, mining represented some 8 per cent of Gross Domestic Product (GDP) and two-thirds of economic growth. At present, the industry has declined to 4.25 per cent of GDP, with NAB predicting that this will fall further to 1.25 per cent over the coming years.
Despite continual growth in previous years, mining investment continues to decline and will likely fall by around 70 per cent over the next three years.
Accompanying that, a similar decline in employment within the industry is taking place, with NAB Research predicting that another 50,000 jobs will be cut over the coming few years, in addition to the approximately 46,000 lost between 2013 and 2015.
The collapse of a key driver of economic growth in Australia isn’t necessarily a cause for fear – an un- steady global and domestic market, coupled with falling commodity prices, has paved a new path for our nation. This is a new challenge that we are only now coming to terms with. Negative growth spirals for 2016 were predicted, with some analysts expecting the Australian Dollar to fall to around US50¢. However, this did not eventuate, and the exchange rate did in fact climb to around US73¢, but still down on recent peaks over a dollar.
In and amongst the decline of mining profits, the final quarter of 2015 still showed a growth rate of 0.6 per cent which can be attributed, in part, to housing construction and consumer and public sector spending. Moreover, potentially crucial figures are emerging from the expansion of the nation’s current account, as the value of net exports from the services trade continues to increase.
The China/Australia Free Trade Agreement (ChAFTA), signed in late 2015, offered an important entrance to the Chinese market as the mining boom dries up. A re- cent Monash University study based on ‘conservative scenarios’ for Chinese growth predicted that up to one million new jobs could be generated over the next de- cade, stemming from the health, education, tourism, finance and construction sectors, all through actively growing trade markets with China.
Such figures would place Australia in its fastest period of employment growth in 25 years. The Monash report outlined that services continue to be the “engine of the Australian economy, accounting for about 75 per cent of economic output and 85 per cent of employment.”
The developing world’s emerging middle classes are critical economic actors in the search for Australia’s future prosperity, owing to our ability to provide high quality products for these growing global markets. China, India and sub-Saharan Africa offer significant opportunities for trade alliances, as these markets and their rapidly burgeoning middle-classes seek out globally recognised, quality products.
In our home state, we have already seen the huge economic potential pent up in diversifying our trade, with Tasmania turning a corner on economic recovery in just three years. For example, several Tasmanian products are hitting the shelves of international stores already, such as Josef Chromy Wines and Lark Whisky, along with our salmon, dairy, beef, fruit and vegetables (ably assisted by former Prime Minister Tony Abbott’s championing of Tasmanian Onions). These world class products are seeing Tasmania develop a reputation as a gourmet paradise, with unique biophysical attributes and a ‘wild’ vibe.
Its primary products are of an exceptional nature – as but one example, Cape Grim, on Tasmania’s North- West Coast, produces some of the finest beef in the world, and bottles the world’s purest rainwater. Tasmania’s most notable success, however, has been in converting many of its exceptional primary products into fermented foods and drinks. These span the full range of fermentation products, from yoghurt and cheese, beer, cider, wine, whisky, and gin.
This profound success, driven by new global needs, led to the creation of a new not-for-profit, Fermen-Tasmania. This organisation is partnering with local producers and the University of Tasmania to use the private sector to build on the State’s capabilities and address Tasmania’s high unemployment, and over- reliance on extraction, welfare, and the public sector.
Critically, this trade boom isn’t just supporting producers and exporters – it is also seeing Tasmania lead the nation in tourism growth.
The private sector has the capacity to address issues the Government is having difficulty conquering, like un-employment. Within this new economy, it ought to be the role of Government to grow environments where the private sector can continue to succeed like the fermentation industry in Tasmania – we are delighted that the Federal and (in our case) State Governments have reduced red tape, championed free trade and continue to work on opening better export links.
In just three years, the Tasmanian economy has emerged from stagnation to lead the nation. It has cast aside deficit spending and returned to surplus. Achievements reached by sticking true to our principles with a firm focus on opening markets and removing barriers.
The rest of Australia should take note – diversify or perish.
Joey Crawford is a member of the Executive of the Bass Electorate. Dan Probert is the Tertiary Liaison Officer of the Tasmanian Young Liberal Movement.