THE resources sector accounts for about 18 per cent of economic activity in Australia, double its share from a decade ago, a new study has found.
The Reserve Bank of Australia study found that resource-related activity, such as engineering, construction and transport, accounts for about one-third of the national total.
It also found that the ‘resource economy’ accounts for nearly 10 per cent of total employment, with support industries accounting for two-thirds of this.
The RBA study is the latest in a string of reports showing that the resources sector’s economic contribution is much greater than its direct boost to output or employment.
A federal Treasury study released last year found that the resources sector accounted for 15-20 per cent of total economic activity, while a 2012 study commissioned by the Minerals Council and written by economist Ed Shann estimated the proportion to be 19 per cent.
The RBA study, titled ‘Industry dimensions of the resource boom’, took this analysis a step further by providing a breakdown of the key resource-related support industries.
“The most important contribution of our methodology is to estimate resource-related activity and to decompose this activity by industry,” report authors Vanessa Rayner and James Bishop stated.
The study started with a wider definition of ‘resource extraction’ than is traditionally employed; as well as mineral and petroleum extraction, it included resource-specific manufacturing such as the production of metals and refined petroleum.
Based on this definition it estimated that in 2011-12, ‘resource extraction’ contributed 11.5 per cent of gross value added, defined as output less intermediate inputs used to produce that output.
Layered on top of this is resource-related activity, which the study found to be an increasingly important part of the economy.
“As the resource boom has gathered pace, resource-related activity has picked up sharply, rising from an estimated 3 per cent of GVA in the early 2000s to around 6.5 per cent in 2011-12,” the study found.
Business services, including engineering, legal and accounting services, formed the largest support sector, contributing 2.25 per cent.
This was partly because business services are key inputs to both resource extraction and investment.
Construction, which is widely perceived to be a big beneficiary of resources projects, made a smaller contribution (1.25 per cent of GVA).
“The relatively small share of construction reflects the fact that the construction industry itself draws on a relatively high share of intermediate inputs from other industries, and that a large share of resource-related construction investment is imported,” the report stated.
The latter point cuts to the politically sensitive issue of Australian content on resources projects.
While new iron ore projects typically have 80-90 per cent Australian content, liquefied natural gas projects like Pluto, Gorgon and Wheatstone normally have about 50 per cent Australian content.
Floating LNG projects, such as Shell’s Prelude development off the Kimberley coast, have an even lower level, likely to be as little as 10-20 per cent.
That is one of the main reasons Premier Colin Barnett wants the contentious Browse project to proceed with a land-based liquefaction plant at James Price Point, rather than a floating plant.
The RBA study said other support sectors making a contribution to economic activity were manufacturing (1 per cent), transport (0.5 percent) and wholesale trade (0.5 per cent).
In terms of employment, the study estimated that 9.75 per cent of jobs in Australia were linked to resource extraction or resource investment.
Of this total, resource extraction directly accounted for 3.25 per cent of all jobs; this is higher than the Bureau of Statistics estimate (2.25 per cent) because the RBA includes resource-specific manufacturing.
The remainder was from the support industries, such as business services, construction and manufacturing.
Since the mid 2000s, the resource economy is estimated to have doubled its share of total employment.
Around two-fifths of this growth reflects the expansion in resource investment - construction, machinery manufacturing and engineering.
A similar proportion was from businesses that service the operating mines, such as transport, engineering and power generation.
The balance (about one quarter) was from people directly employed in resource extraction.
