NEW MINING AND MINERAL-PROCESSING PROJECTS IN WESTERN-AUSTRALIA - EFFECTS OF EMPLOYMENT AND THE MACROECONOMY

Investment in Western Australia's mining and mineral-processing indust ries is currently surging. This stems from new opportunities for downs tream processing provided by the deregulation of energy markets techno logical innovation and East Asia's increasing demands for minerals. Th is paper examines the macroeconomic impacts of this investment using t hree complementary approaches: (i) The main features of 35 mining and mineral-processing projects which are already under way or committed t o proceed are analysed in detail. This covers the value, timing of and direct employment associated with these projects. (ii) The flow-on be nefits of the projects are estimated using multiplier techniques. (iii ) The broader effects of the projects are simulated using a new econom y-wide model of the WA economy. Major findings of the paper include: T he total value of the 35 projects is estimated to be $5.8 billion, whi ch when annualised becomes $3.6 billion p.a. These projects will gener ate approximately 9000 new jobs directly during the construction phase . According to multiplier computations, between 16 000 and 18 000 new jobs will be generated elsewhere in the economy by the 35 projects dur ing the construction period. Taking the midpoint of this range of 17 0 00, the results indicate that total employment increases approximately by 9000 + 17 000 = 26 000 jobs. The WA Model (WAM), a new general equ ilibrium model of the Western Australian economy, indicates that the n ew investment will create approximately 39 000 new jobs in the WA econ omy during the construction phase. The 39 000 jobs projected by WAM re fer to both direct and indirect employment; this figure differs from t he multiplier estimate of 26 000 due to the more extensive economic li nkages included in WAM. WAM also indicates that about 22 000 new jobs in the production phase will be created by the new projects. These new jobs continue over the working lives of these projects. In the constr uction phase, exports are projected to fall by about 12% due to a sign ificant real appreciation of the exchange rate caused by a rise in dom estic costs. However, as the projects commence operations, WA exports will be about 5% higher than otherwise. During the construction phase, industries which service the projects by supplying materials are proj ected to expand the most. The major exporting industries, and those cl osely related to export activities, contract as they are squeezed by t he real appreciation of the exchange rate. However, the overall income and spending growth that accompanies the construction of the projects causes many service industries and import-competing industries to exp and. During the production phase, the four mining and mineral-processi ng industries where the majority of the investment takes place are pro jected to expand output the most. In this phase, there are only modest cost pressures and significant growth in income. Consequently, almost all industries in WA will grow with most of the new jobs being create d in industries other than mining and mineral processing. This shows t hat the effects of the projects are much broader than might initially thought to be the case. (C) 1997 Elsevier Science Ltd.