Media Release

A new report by the SA Centre for Economic Studies suggests that while mining activity has grown strongly in South Australia over recent years, the State is not in the middle of a mining boom. Full Image (54.96K)

Monday, 18 June 2012

The South Australian Centre for Economic Studies claims the State is not experiencing a "mining boom" and warns against resting all our hopes for the future prosperity of South Australia on the realisation of a mining boom.

The comments are made in the Centre's latest Economic Briefing Report, released today. The Report provides a twice yearly appraisal of the state of the South Australian economy and is prepared by economists from the University of Adelaide and Flinders University.

In the report, the Centre suggests that while mining activity has grown strongly in South Australia over recent years "it is nevertheless difficult to sustain the notion that South Australia is in the middle of a mining boom".

In support of this conclusion, the report notes that "mining activity in South Australia is still relatively small, such that mining output ... accounts for around only 4 per cent of the State's Gross Product".

Other evidence to support the argument that South Australia is not yet experiencing a mining boom include the fact that new capital expenditure by the mining industry in South Australia was less last year than it was four years ago; while expenditure on mineral exploration in South Australia in 2011 accounted for only 6.6 per cent of such expenditure across Australia as a whole.

The Centre notes that the one project which would dramatically change this picture of a still small mining sector in this State is the proposed expansion by BHP Billiton of its Olympic Dam mine. The cost of this project is estimated to exceed $20 billion. If this project were given the go ahead today it would lift South Australia's share of "advanced new mining projects" across Australia from 0.5 per cent to around 9 per cent, a dramatic increase, which underlines the sheer size of this project.

The report goes on to note, however, that "unfortunately, there is now increasing doubt about when the Olympic Dam project will proceed". The latest statements from BHP Billiton indicate that the BHP Billiton Board will now not give consideration to final approval of the project until later this year.

The report also suggests there are several factors that will limit the contribution the Olympic Dam project will make to the prosperity of the South Australian economy, even once it does proceed.

The report concludes:
"... it is important to keep a proper perspective on the extent to which growth of the mining industry will contribute to growth of the South Australian economy in coming years. Its contribution will not be insignificant, particularly once construction of the Olympic Dam expansion proceeds, but at the same time it is unlikely to be so significant as to be able to solely drive the continued economic expansion and prosperity of the State. And doubts about the timing of the Olympic Dam expansion need to be kept in mind. All in all, it would not be wise for South Australians to rest all of our hopes for the future on the prospects of a "mining boom", especially if it meant becoming complacent in achieving policy objectives and outcomes in other strategic areas. In particular, all South Australians need to continue to work towards growing the overall competitiveness of the State and towards growing productivity within the State. It seems to us that still more could be done, and should be done, in this area."