By Michael GeogheganThe economy is expected to contract by 0.8 per cent this year, according to a new report.
The Reserve Bank of Australia (RBA) has forecast GDP will contract by 1.5 per cent in 2018.
“The impact on the economy will be felt most sharply in the mining sector, which has experienced a large decline in the number of workers in recent years,” the RBA said in its latest monthly report.
“As a result, mining jobs are expected to shrink by 1,400 jobs in the next 12 months.”
The mining industry is likely to experience its biggest decline in employment over the next two years.
The mining sector employs almost 9 per cent of the nation’s workforce.
Australia’s mining industry employs about 15 per cent more people than it did a decade ago, according the Australian Bureau of Statistics.
“Job losses in the construction industry are likely to be more severe than in other sectors, due to the large number of new workers required to complete construction projects,” the report said.
The report also said the mining industry was in the midst of a major labour shortage.
“In particular, the shortage of skilled workers has created an unprecedented labour shortage, and this is expected at least for some of the industries which have experienced large employment declines in recent times,” it said.
“There is also a strong likelihood that some of these industries will experience further job losses in coming years, with potentially severe impact on employment levels.”
The report’s authors, economists from the Australian National University, said that if there were no significant changes to labour markets by the end of this year it could lead to “the largest annual decline in mining employment in history.”
“If mining were to continue to contract in the short-term, the impact on mining jobs will be even greater, with the average mining employee losing almost three jobs over the past 12 months,” the researchers said.
“We predict that this will be followed by a subsequent decline in productivity in the economy, with productivity contracting by 3.5 to 5 per cent over the medium term.”
The Reserve bank said that as a result of the mining shortage, unemployment rates are expected in the sector to rise, and could rise even further.
“While it is possible that unemployment will fall over time, this would require a further sharp reduction in the level of unemployment, or an increase in the employment of people seeking to enter the labour market,” the economists said.’
A very difficult time’The report warned that while the mining downturn was a difficult time for the Australian economy, there were many positives that came out of it.
“Many of the factors that contributed to the mining slowdown have been addressed,” the authors said.
“For example, Australia’s mining sector has seen a significant drop in the rate of capital investment in the past few years, as well as a decline in investment in technology and infrastructure.”
And the mining boom, which is also expected to be the fastest growing sector in Australia in the coming years as the world’s biggest mining companies continue to expand overseas, is set to continue.
“Australia’s major mining companies are set to invest more than $2 trillion in infrastructure over the coming decades, with major infrastructure projects including railroads, ports and ports and railways.”