Investment in Western Australia's mining and mineral-processing industries is currently surging. This stems from new opportunities for downstream processing provided by the deregulation of energy markets technological innovation and East Asia's increasing demands for minerals. This paper examines the macroeconomic impacts of this investment using three complementary approaches: (i) The main features of 35 mining and mineral-processing projects which are already under way or committed to proceed are analysed in detail. This covers the value, timing of and direct employment associated with these projects. (ii) The flow-on benefits of the projects are estimated using multiplier techniques. (iii) The broader effects of the projects are simulated using a new economy-wide model of the WA economy. Major findings of the paper include: The total value of the 35 projects is estimated to be $5.8 billion, which when annualised becomes $3.6 billion p.a. These projects will generate 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 during the construction period. Taking the midpoint of this range of 17 000, the results indicate that total employment increases approximately by 9000 + 17 000 = 26 000 jobs. The WA Model (WAM), a new general equilibrium model of the Western Australian economy, indicates that the new investment will create approximately 39 000 new jobs in the WA economy during the construction phase. The 39 000 jobs projected by WAM refer to both direct and indirect employment; this figure differs from the multiplier estimate of 26 000 due to the more extensive economic linkages 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 construction phase, exports are projected to fall by about 12% due to a significant real appreciation of the exchange rate caused by a rise in domestic 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 projected to expand the most. The major exporting industries, and those closely related to export activities, contract as they are squeezed by the 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 expand. During the production phase, the four mining and mineral-processing industries where the majority of the investment takes place are projected 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 created in industries other than mining and mineral processing. This shows that the effects of the projects are much broader than might initially thought to be the case. (C) 1997 Elsevier Science Ltd.
