Productivity in the Australian Mining Sector

Abstract

BREE has a program of long-term strategic research that is in addition to its regular publications. Where at all possible it is BREE�s intention to release the outcomes of its long-term research as BREE Discussion Papers. The goal is for BREE Discussion Papers to provide an opportunity for dialogue on key issues facing Australia�s resources and energy sectors. The views expressed in BREE Discussion papers will be the authors alone and will not necessarily be those of BREE or the Department of Resources, Energy and Tourism. In this, the first BREE Discussion Paper, results are presented of a study on Australian mining productivity. The aim of this research was to provide estimates of trends in Australian mining productivity and, where possible, explain them. Productivity growth is an important issue for Australia. Since the 1990s there appears to have been a productivity slowdown in most sectors. Using unadjusted numbers, the biggest decline in productivity in any sector over the past decade has been in mining which has experienced negative rates of productivity growth. Possible reasons for a slowdown in Australian mining productivity include: input to output lags, transition to lower yielding resources, inefficiencies of vintage capital, the lumpy nature of mining investment, and high commodity prices that place a priority on rates of extraction rather than costs of extraction. In this Discussion Paper the authors find that after adjusting for capital lags and both endogenous and exogenous depletion effects, Australian mining productivity grew at a positive rate over the past decade, albeit at a slower rate than in the 1990s. A key finding is that deteriorating productivity performance in mining over the past decade is attributable to both exogeneous and endogeneous resource depletion