Mining regains power as Gross Domestic Product rebounds

Australian Gross Domestic Product (GDP) improved 3.4% last December quarter indicating hope for a mining economic recovery shows the Australian Bureau of Statistics (ABS) data.

Due to COVID-19 state lockdowns lifting in NSW, Victoria and ACT the national economy recovered significantly after a drop of 1.9% the previous September quarter.

The ABS Australian National Accounts: National Income, Expenditure and Product data reveals that at the end of December 2021 and before the pandemic started in September 2019 Australia’s economy had grown the same amount of 3.4% for those quarters.

Whilst GDP rebounded nation wide last quarter, mining production did not prove as vast a percentage points contribution to growth as other competitor categories, signalling improvement, yet with a way to go.

Within the highest categories: professional, scientific and technical services; accommodation and food services; and health care and social assistance contributed 0.4% each of the total 3.4% GDP whereas mining faired the worse contributing negatively with -0.1%.

Factors that impacted during the September to December quarter were a fall in the categories of: coal mining; oil and gas extraction; and other mining, although this was partly offset by a rise in iron ore mining, overall this resulted in mining percentage change to show a -1.0% decrease. 

Coal Mining production economy to rebound.

Coal mining decreased 4.5% because of heavy rainfall and labour issues impeding mine operations.

Oil and gas extraction dominated by maintenance activities suffered due to weather conditions and that caused a natural field slump.

Planned and unplanned maintenance activities impacted other mining, mostly copper production although this was partly offset by an increase in gold production.

This quarter the -1.0% mining decrease summary was calculated with the offset of a 0.7% rise in iron ore mining after a disruptive production schedule due to last years September mine upgrading.

International trade halted this quarter as coal exports fell due to the weather impacting extraction. 

Despite this, the Organisation for Economic Co-operation and Development (OECD) countries proved strong economic growth in the December quarter, countering the impacts of COVID-19 with Australia’s 3.4% GDP rise leading the way ahead of the United States and South Korea as top performers.

According to the Department of Industry, Science, Energy and Resources same quarterly December release Australia’s mining sector contributes to an estimate 10% of GDP, counts for more than half of Australia’s total exports and around a quarter of a million people have jobs in the sector.

Australia is the world’s number one exporter of metallurgical coal, mostly used to make steel, making up 55% of the top 5 exporters ahead of the United States, Canada, Russia and Mongolia.

As the world’s second largest exporter of thermal coal, Australia exports 21% used mostly in electricity generation of the top 5 countries behind Indonesia and ahead of Russia, South Africa and Columbia.

These promising statistics in The Resources and Energy quarterly publication counter the negativity in mining GDP percentage contribution, proving a strong outlook for Australia’s mineral exports as the economy rebounds from the energy shortages it suffered during the pandemic.

Although the same department’s quarterly forecast data predicts that at a world macro level Australia is going to reach peak economic growth of 4.1% this year, after a steady 6.5% increase over the past couple of years, before dropping slightly to 2.6% in 2023.

The Australian energy sector is still predicted to perform strongly, with selected exports thermal coal showing a $15,998 million value for the year 2020-21 which could increase to $27,432 million for 2022-23.

Similarly metallurgical coal had a unit value of $23,170 million in 2020-21 and that could increase to $37,083 million in 2022-23.

The Office of the Chief Economist predicts that COVID-19 cases might continue to influence Australia’s total economic recovery and impact export earnings and energy shortages, despite this a strong outlook remains for peak growth this year with finances just easing slightly afterwards.