LAUNCESTON, Australia – (Reuters) – The resource boom is often cast as both villain and hero in Australia, being simultaneously recognized as a major driver of the country’s wealth but also as a destroyer of traditional industries.
Two recent research papers have highlighted this dual nature of investment boom in iron ore, coal and liquefied natural gas (LNG), and taken together show that while Australia has benefited hugely from China-led demand for commodities, the risks seem to be mounting.
First, the good news. Australia has largely avoided the dreaded “Dutch Disease” over the past decade, according to an Aug. 22 research report from the Reserve Bank of Australia.
“Dutch Disease” was coined by The Economist magazine to describe the negative impact of a booming resource sector on other parts of the economy, using the discovery of natural gas off the Netherlands and the subsequent decline of that nation’s manufacturing as the eponymous example.
Over the decade to 2013, the resource boom boosted real per capita household disposable income by 13 percent, raised real wages by 6 percent and lowered the unemployment rate by 1-1/4 percentage points, the Reserve Bank researchers said.
While this was the good news from the investment of hundreds of billions of dollars in boosting commodity output, the central bank also found that the appreciation of the Australian dollar weighed on industries exposed to trade, such as manufacturing and agriculture.