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Productivity in the Mining Industry: Measurement and Interpretation

Author

Listed:
  • Vernon Topp
  • Leo Soames
  • Dean Parham
  • Harry Bloch

    (Productivity Commission)

Abstract

Mining typically accounts for around 5 per cent of Australia's nominal market sector gross domestic product. Long lead times between investment in new capacity in mining and the associated output response can lead to short term movements in mining multifactor productivity (MFP) unrelated to underlying efficiency. Ongoing depletion of Australia's natural resource base is estimated to have had a significant adverse effect on long-term mining MFP. Over the longer-term, MFP impacts of resource depletion have been offset by technological advances and improved management practices. An increase in the use of open-cut mining has been a key development, along with a general increase in the scale and automation of mining equipment. An expected rebound in mining MFP from 2008-09 onward may be delayed as a consequence of the decline in world prices for many mineral and energy commodities in mid-to-late 2008. Any temporarily idle capital associated with production cut-backs and mine closures will tend to lower MFP. On the other hand, significantly lower commodity prices may lead mining companies to cut costs, with a positive effect on MFP. Despite the impact of the fall in mining MFP, the sector has made a significant contribution to the strong overall growth in national income so far this decade through a substantial improvement in Australia's terms of trade. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.

Suggested Citation

  • Vernon Topp & Leo Soames & Dean Parham & Harry Bloch, 2008. "Productivity in the Mining Industry: Measurement and Interpretation," Staff Working Papers 0807, Productivity Commission, Government of Australia.
  • Handle: RePEc:ris:prodsw:0807
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    Citations

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    Cited by:

    1. repec:eee:eecrev:v:101:y:2018:i:c:p:157-180 is not listed on IDEAS
    2. Pothen, Frank & Schymura, Michael, 2014. "Bigger cakes with less ingredients? A comparison of material use of the world economy," ZEW Discussion Papers 14-030, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Daniel M. Rees & Penelope Smith & Jamie Hall, 2016. "A Multi-sector Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 92(298), pages 374-408, September.
    4. Knop, Stephen J. & Vespignani, Joaquin L., 2014. "The sectorial impact of commodity price shocks in Australia," Economic Modelling, Elsevier, vol. 42(C), pages 257-271.
    5. Benita Maldonado, Francisco J. & Gaytán Alfaro, Edgar D. & Rodallegas Portillo, Mayra C., 2012. "Un estudio no paramétrico de eficiencia para la minería de Zacatecas, México || A Non-Parametric Approach to Efficiency for Mining in Zacatecas, Mexico," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 14(1), pages 54-75, December.
    6. Huang, Yuanxi & Todd, Daniel & Zhang, Lei, 2011. "Capitalizing on energy supply: Western China's opportunity for development," Resources Policy, Elsevier, vol. 36(3), pages 227-237, September.
    7. Michael Plumb, 2011. "Discussion of Productivity: The Lost Decade," RBA Annual Conference Volume,in: Hugo Gerard & Jonathan Kearns (ed.), The Australian Economy in the 2000s Reserve Bank of Australia.
    8. C. Lovell & J. Lovell, 2013. "Productivity decline in Australian coal mining," Journal of Productivity Analysis, Springer, vol. 40(3), pages 443-455, December.
    9. repec:eee:ejores:v:264:y:2018:i:3:p:1116-1129 is not listed on IDEAS
    10. Hajkowicz, Stefan A. & Heyenga, Sonja & Moffat, Kieren, 2011. "The relationship between mining and socio-economic well being in Australia's regions," Resources Policy, Elsevier, vol. 36(1), pages 30-38, March.
    11. Krogscheepers, Corris & Gossel, Sean Joss, 2015. "Input cost and international demand effects on the production of platinum group metals in South Africa," Resources Policy, Elsevier, vol. 45(C), pages 193-201.
    12. Jenny Gordon, 2016. "Australia's Productivity: Some Insights from Productivity Analysis," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 3(2), pages 173-186, May.
    13. Tilton, John E., 2013. "The terms of trade debate and the policy implications for primary product producers," Resources Policy, Elsevier, vol. 38(2), pages 196-203.
    14. Isaac Gross & James Hansen, 2013. "Reserves of Natural Resources in a Small Open Economy," RBA Research Discussion Papers rdp2013-14, Reserve Bank of Australia.
    15. John E. Tilton, 2013. "Cyclical and Secular Determinants of Productivity in the Copper, Aluminum, Iron Ore, and Coal Industries," Working Papers 2013-11, Colorado School of Mines, Division of Economics and Business.
    16. Simon Zheng & Harry Bloch, 2014. "Australia’s mining productivity decline: implications for MFP measurement," Journal of Productivity Analysis, Springer, vol. 41(2), pages 201-212, April.
    17. Kushnir, Duncan & Sandén, Björn A., 2012. "The time dimension and lithium resource constraints for electric vehicles," Resources Policy, Elsevier, vol. 37(1), pages 93-103.

    More about this item

    Keywords

    mining; resource depletion; multifactor productivity;

    JEL classification:

    • D - Microeconomics
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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