The Recent Australian Boom
The recent resources boom in Australia had a significant impact as far as the performance of Australia’s economy is concerned. The resources boom resulted in a significant increase in the demand for several economic resources such as minerals. Consequently, a country like Australia, which is one of the main producers of these resources, has benefited significantly from this boom. Pearse (2009) points out that Australia’s mining sector has experienced unprecedented growth in recent years and this growth has a significant impact on the entire economy of the country. Despite the global economic recession whose effects are still being felt in many parts of the country, the Australian economy has managed to maintain steady growth and, therefore, making it one of the few western countries that have managed to register a growth in its economy during the recent global economic turmoil. The major reason behind this sustained economic growth in Australia is the high demand for the country’s mineral resources in the Asian market and, specifically, the Chinese market.
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The recent economic boom experienced in China has led to the country’s demand for some resources that are the main drivers of its economy. These resources include minerals such as iron ore that has registered a significant increase. Being one of the biggest iron ore producers in the world, Australia has been the greatest beneficiary as a result of the increased demand for iron ore in China. In addition to that, the increase in demand for iron ore products has resulted in an increase in their prices, which has enabled Australia and other major iron ore producing countries to register a much higher income from the sale of these products. Pearse (2009) points out that in addition to its vast iron ore resources, Australia has benefited from the increase in demand for other resources such as cola whose demand has significantly increased in several places across the world. This increase in mineral resources, in addition to the fact that the mining sector is one of the country’s core sectors, implies that the impact of the resources boom has been felt by the entire economy in terms of the growth facilitation.
Darbas and Lawson (2004) point out that despite the recent steady economic growth in Australia occasioned by the resources boom, the country has started to experience a decline in the performance of its economy. Moloney and Hill (2012) note that Australia’s economic growth is registering a steady decline whose cause, just like the case with the growth, are the events taking place within the country’s mining sector. Some of the countries that are responsible for causing the resources boom in Australia are experiencing a decline in their economic performance. This implies that their demand for some of the core drivers of the economy such as mineral products is on a steady decline.
For instance, Lattimore and Pobke (2008) point out that China, one of the major importers of Australia’s mineral products, is experiencing a steady decline in its economic performance. For a long time, China has managed to maintain steady economic growth against the backdrop of a global economic recession. However, the effects of the global economic crisis seem to have finally caught up with the country and this has resulted in a registered decline in economic performance. This implies that the Chinese demand for some of the key commodities that are key drivers of the economy has significantly reduced. Consequently, a country such as Australia, which has relied on Chinese money to drive its economic growth has started experiencing the impacts of the decline in its economy.
There are various implications that the Australian economy will have to contend with as a result of the inevitable end of the mineral resources boom being experienced in China and other parts of the world. First and foremost, the country’s mining sector will be directly impacted by the end of this boom. The recent years have seen Australia’s mining sector record an unprecedented growth that has resulted in significant growth in the overall performance of the industry. However, now that the end of this boom is in sight, the country’s mining sector is likely to register a significant decline in its performance. Enright and Petty (2013) point out that some of the major industry players have already started experiencing significant drops in their profit earning due to the events taking place in the global economic scene. These events are responsible for the end of the resources boom.
Bearing in mind that the mining sector is one of the major sectors in Australia’s economy, a sustained decline in the performance of this sector is bound to affect the entire economy. This is attributable to the fact that the country’s GDP might reduce significantly as a result of a remarkable reduction of earnings from the mining sector. In addition to that, Kym (2012) explains that being one of the country’s main sectors, the decline in the mining sector’s performance is bound to have a ripple effect that will be felt in other sectors of the economy as well. The financial services, manufacturing and construction sectors, which are also some of Australia’s significant sectors, are likely to suffer from the ripple effects of the decline in the performance of the country’s mining sector. This, therefore, implies that the entire Australian economy is likely to be impacted negatively by the end of the resources boom.
According to Gleeson, Darbas, and Lawson (2004), despite the impact of the end of the resources boom on Australia’s economy, the country still has options that can enable it to weather this impact. Australia should put in place policy measures that are meant to stimulate the growth of other sectors of the economy. The country should identify some of the other sectors that contribute significantly towards the performance of its economy and identify ways through which the performance of these sectors can be enhanced. This should be aimed at ensuring that in case of an adverse situation in one of the main economic pillars such as mining, the other major drivers of the economy can maintain steady growth and performance, thus, cushioning the entire economy from some of the negative impacts arising from this situation. Moreover, Connell (1993) explains that Australia can still rescue its mining sector by looking for alternative markets from other burgeoning economies especially from other BRICS’ countries that are Brazil, Russia, and India. Just like China, these countries are also experiencing an economic boom.
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