The West

Most better off  from boom time
Vroom, vroom, boom: Car sales went up during good times in the mining sector. Picture: Sharon Smith/The West Australian

The mining boom made most Australians richer and dramatically cut unemployment, research shows, but it pushed up rents and interest rates on homes while hurting the farming sector.

Compiled by Reserve Bank economists, the research suggests real wages were pushed 6 per cent higher by the boom than they would have been otherwise.

Researchers Peter Downes, Kevin Hanslow and Peter Tulip looked at how the Australian economy would have played out without the huge lift in resources prices that began in 2002.

Their research shows after-inflation real per capita household disposable income lifted 13 per cent. Unemployment was 1.25 per cent lower, or close to 100,000 people, because of the boom.

Much of the extra income that flowed to mining companies also ended up in Australians' retirement nest eggs. "Households that own mining shares (including through superannuation) or real estate have done well," the authors noted.

The extra income was largely spent by most Australians.

Sales of cars were likely 30 per cent higher with the boom than without it and Australians also lifted their spending on food, telecommunications and so-called "durable goods", such as household appliances.

One of the biggest increases was on housing but, because it takes time to build more homes, there was extra pressure on house prices and rents.

Instead of climbing at more than twice the pace of inflation, rents would largely have kept track with ordinary prices without the boom.

The researchers believe the boom meant interest rates were two percentage points higher than they would otherwise have been last year.

On a $300,000 mortgage, that two-percentage point difference is worth almost $100 a week in repayments.

Among industries, though the manufacturing sector went backwards because of the mining boom, the hardest hit was agriculture.

According to the research, the farm sector could be almost 20 per cent smaller than otherwise because of the boom.

Though the stronger dollar from the boom cut the price of importing machinery, it hit the prices that farmers got on world markets.

"It is an industry heavily dependent on exports and gains little benefit from the surge in domestic incomes and demand associated with the mining boom," the researchers said.

The West Australian

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