More than just exports

TREASURY uses relationships from the latest available input-output tables for 2007-08. Mining includes metals manufacturing, while mining-related sectors cover those parts of domestic manufacturing, construction and services that directly contribute to mining output and investment. 

The mining and related sectors on this basis rise from 18.3 per cent of gross domestic product (GDP) in 2010-11 to 20.3 per cent in 2011-12. This calculation appears to ignore mining service exports and mining services investment as these are not inputs into mining. They could add a further 1 per cent to 2 per cent of GDP to the share of the mining and mining-related sectors.

The RBA estimates the mining and mining-related sectors by adding resource exports, plus mining investment, less an estimate of related imports. This suggests the sector was only 14.75 per cent of GDP in 2010-11 – made up of mining exports of 12.5 per cent of GDP (effectively incorporating mining services in the price of mining exports) and net mining investment of 2.25 per cent of GDP, after deducting an estimate of imports. 

This methodology underestimates the size of the mining and mining-related sectors as it ignores domestic consumption of mining output (for example, oil, gas and coal) and related mining services, mining service exports and mining service investment. Mining exports were 80 per cent of mining production in 2006-07 and exports and domestic output have grown broadly in line until recently.

Assuming mining services add as much to the domestic value of mining output as they do to exports, the value of total mining output (for export and domestic use) rises to 15.6 per cent of GDP.

To this we need to add mining service exports of $9 billion (0.6 per cent of GDP) and mining service investment less imports, which can be assumed arbitrarily to be 1 per cent of GDP. Given the rapid growth in mining services this could be an underestimate of mining service investment.

This gives a total share of 19.5 per cent of GDP in 2010-11 for the mining and mining-related sectors. With mining output rising 10.6 per cent in 2011-12, mining investment rising to about 6 per cent of GDP and assuming half is imported, the adjusted Reserve Bank methodology suggests mining and mining-related output in 2011-12 will be near 22 per cent of GDP.

In broad terms, both methodologies when corrected suggest mining and related sectors are around 20 per cent of GDP in 2010-11 and could be around 22 per cent of GDP in 2011-12.