RDP 2013-02: Industry Dimensions of the Resource Boom: An Input-Output Analysis 6. Conclusion

The large and persistent rise in Australia's terms of trade and the associated boom in resource investment has had very different implications for growth in the resource and non-resource parts of the economy. However, it is not only the resource extraction sector that has benefited from the change in relative prices and surge in investment, but also industries that provide inputs to resource extraction and investment.

The contribution of this paper has been to estimate the size, growth rate and industry composition of a broad measure of the resource economy that includes both resource extraction and resource-related activity. Underpinning our approach are the input-output tables published by the ABS, which enable us to trace the effects of higher demand in the resource extraction sector through to the value added of the industries that provide the inputs necessary for this demand to be met. In this way, we can analyse the impact of this increase in extraction and investment not only on the resource extraction sector itself, but also on other sectors of the economy.

Under certain assumptions for relative prices, the spillovers from the resource sector to activity in other industries appear to be large. In terms of its contribution to aggregate economic activity, the resource economy – broadly defined – accounted for around 18 per cent of GVA in 2011/12. Of this, resource-related activity accounted for about one-third (6½ per cent of GVA), which includes activities as diverse as business services, construction, transport, and manufacturing. The remaining two-thirds of the resource economy was accounted for by the resource extraction sector itself (which also includes some processing of resources).

These estimates have implications for how we view employment in the resource economy. Under certain productivity assumptions, we find that the resource economy accounted for around 9¾ per cent of employment in 2011/12. This is around three times larger than the workforce employed in resource extraction, and reflects the employment generated by resource-related activities as a result of the extraction of the resources themselves and investment in new capacity. These resource-related industries have also provided the largest contribution to growth in resource employment since the mid 2000s.