Australia's Mining Boom and China

How China's growth drove a massive Australian mining boom in the 2000s, the economic benefits and strains it caused, and Australia's long run without recession.

Australia is rich in iron ore, coal, gas, gold and lithium. In the 2000s, China’s industrial boom created enormous demand for these resources.

The boom

Iron ore prices rose several times over.
Mining investment surged, especially in Western Australia and Queensland.
Australia’s terms of trade, the price of its exports relative to imports, reached record highs.
China became Australia’s largest trading partner.

Benefits

Higher national income and tax revenue.
High wages in mining regions.
Australia avoided recession during the 2008 global crisis, helped by Chinese demand and stimulus.

Australia went nearly 29 years without a recession, from the early 1990s until the COVID-19 shock in 2020.

Strains

Two-speed economy: mining states boomed while manufacturing and tourism struggled with a strong Australian dollar.
Housing costs rose in mining towns and cities.
Dependence on China: when trade tensions rose around 2020, China restricted imports of Australian coal, barley, wine and other goods, though iron ore continued.

Managing the wealth

Unlike Norway, Australia didn’t save most of its resource windfall in a big fund, though it set up the Future Fund in 2006, mainly to cover public pension liabilities. A proposed resources super profits tax in 2010 faced fierce opposition and was scaled back.

The mining town

During the boom, a small town in Western Australia sees wages soar and rents triple. When iron ore prices fall, construction stops, jobs vanish and house prices collapse.

Thinking a mining boom benefits all industries equally

A strong currency and rising costs can hurt manufacturing and tourism during resource booms.

Key takeaways

China's growth drove Australia's 2000s mining boom.
Australia went nearly 29 years without recession until 2020.
The boom created a two-speed economy and dependence on China.
Australia saved less of its windfall than Norway.