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18.7 MINING PRODUCTION(a)(b)
Table 18.8 shows the industry GVA of the mining division as defined in the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 (1292.0). The table also shows the contribution of the mining industry to Australia's GDP in the period 2003-04 to 2007-08.
Production in the services to mining industry accounts for a small proportion (around 8%) of total mining production. However, the total value of services to mining may be larger than these figures indicate as some services may have been provided by businesses classified to other industries such as construction or business services.
Contribution to state production
The importance of the mining industry in terms of production as measured by total factor income varies across the states and territories. Total factor income is a measure of state production. It is the total payments received by labour and owners of capital used in the production of the goods and services.
During the period 1997-98 to 2007-08 the Northern Territory experienced significant changes in the contribution of the mining industry to total state production, varying from 13% in 1998-99 to 35% in 2000-01 (graph 18.9). In 2007-08 the mining industry accounted for 31% of total production in the Northern Territory.
In Western Australia, the contribution of the mining industry increased from 19% in 1997-98 to 29% in 2007-08 (graph 18.9).
The mining industry's share of Queensland total production varied between 6% and 11% in the period 1997-98 to 2007-08 (graph 18.9). In 2007-08, the mining industry's contribution to state production was 10%.
Table 18.10 shows the proportion of exports contributed by the mining industry based on exports by industry of origin.
In the period 2004-05 to 2008-09 the value of exports from the mining industry has almost tripled. By comparison, the value of exports from the manufacturing industry has grown by 37%. As a consequence, the mining industry's contribution to total goods exported from Australia increased from 32% in 2004-05 to 51% in 2008-09, while that for the manufacturing industry fell from 53% to 40%.
Natural resource royalties
Natural resource royalties paid by mining businesses are collected by state and Northern Territory governments for mining onshore and up to three nautical miles offshore, and by the Australian Government outside that area. The basis of the mineral royalties varies between states. Some royalties are based on the value of production at mine site, others on sales value, gross proceeds or profit. The rates imposed also vary between commodities.
Onshore and within coastal waters, royalties are levied on mineral and petroleum production. State petroleum royalties and Commonwealth crude oil excise apply onshore and in coastal waters. Petroleum produced in offshore areas of Australia (but not including the North West Shelf) is generally subject to an offshore petroleum resource rent tax levied by the Australian Government. Petroleum royalties and crude oil excise apply to production from the North West Shelf project.
Natural resource royalties expenses include payments under mineral lease arrangements, and resource rent taxes and royalties. In 2006-07 these mining royalties expenses totalled $6,573m. The greatest proportion of royalties was paid by the oil and gas extraction industry ($2,990m or 46%). Metal ore mining businesses (comprising copper, gold, mineral sands, silver-lead-zinc, bauxite, nickel and other metal ore mining) paid $947m or 14% of total mining royalties in 2006-07. The coal mining industry paid $1,696m (26%) and iron ore mining businesses $849m (13%). The remaining royalties were paid by non-metallic mineral mining and quarrying, and exploration and other mining support services businesses.
Structure and performance
The source for the statistics in this section is the annual Economic Activity Survey (EAS) of businesses, conducted by the Australian Bureau of Statistics (ABS).
Production of an industry can be measured in terms of industry value added (IVA), in much the same way as industry GVA. However, unlike industry GVA (the national accounts concept of production), IVA is not adjusted for a number of national accounting conventions, as the information to make these adjustments cannot be collected in the EAS. The advantage of IVA, however, is the availability of more detailed (component) industry statistics.
In 2007-08 mining businesses paid a total of $12,864m in wages and salaries, and generated $120,881m in sales and service income and $71,484m IVA (table 18.11).
In 2007-08, the metal ore mining industry contributed the largest proportion (38%) of total mining production measured in terms of IVA, followed by oil and gas extraction (33%) and coal mining (20%) (table 18.11). The metal ore mining industry also generated the most operating profit before tax (43%, $19,466m) in 2007-08.
In terms of wages and salaries, the largest contributors were the metal ore (31%) and coal (27%) mining industries. The wages and salaries paid were $3,958m from the metal ore mining industries and $3,512m from the coal mining industry.
Capital expenditure in 2006-07 was largest in the metal ore mining industry (36%), followed by the oil and gas extraction industry (28%) (table 18.12). Most of the capital expenditure on acquisitions was spent on dwellings, other buildings and other structures (56%). A significant proportion (25%) was also spent on plant, machinery and equipment. The coal mining industry accounted for the largest share of acquisition expenditure on plant, machinery and equipment (42%), while the metal ore mining industry accounted for the largest share of such expenditure on dwellings, other buildings and other structures (41%).
The metal ore mining and oil and gas extraction industries contributed most of the net capital expenditure, i.e. capital expenditure after deducting disposals of assets. Combined, these industries accounted for 65% of total net capital expenditure made in 2006-07.
Operating profit before tax (OPBT)
Operating profit before tax (OPBT) is a measure of profit before extraordinary items are brought to account and prior to the deduction of income tax and appropriations to owners (e.g. dividends paid).
From 2006-07 to 2007-08, OPBT for the mining industry increased by $4,591m or 11% (table 18.13). Oil and gas extraction contributed $3,767m to this rise. Coal mining recorded a reduction of $389m, while metal ore mining had a reduction of operating profit before tax of $243m.
Research and development (R and D)
The Organisation for Economic Co-operation and Development (OECD) defines R and D as comprising 'creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications'. R and D activity is characterised by originality. It has investigation as a primary objective, the outcome of which is new knowledge, with or without a specific practical application, or new or improved materials, products, devices, processes or services. R and D ends when work is no longer primarily investigative.
Graph 18.14 shows the type of R and D expenditure by the mining industry. For the period 1996-97 to 2006-07 other current expenditure other than labour costs is the major component of R and D expenditure for the mining industry, accounting for 79% of total mining R and D expenditure in 2006-07. This category includes: expenses on materials, fuels and other inputs; rent, leasing and hiring; repairs and maintenance; payments to outside organisations for use of specialised testing facilities or for analytical work, engineering or other specialised services in support of R and D projects carried out by the business; commission and consultant expenses for research projects carried out by the business (except direct labour costs); software for own account produced as part of R and D; and the proportion of expenditure on general services and overheads attributable to R and D activity. In the mining industry these expenses increased by $1,649m (464%), from $355m in 1996-97 to $2,045m in 2006-07. The amounts spent on capital expenditure and labour costs increased by $81m (68%) and $243m (277%) respectively over the same period. As a result, capital expenditure as a proportion of total mining R and D expenditure fell to 8% in 2006-07, significantly lower than the 21% recorded in 1996-97. Labour costs as a proportion of total mining R and D expenditure fell from 16% to 13% over this period.
During the period 1996-97 to 2006-07, the mining industry's contribution to total (all industries) R and D expenditure rose from 13% to 21%. The manufacturing industry's share of total R and D expenditure continued to be the highest, accounting for 33% in 2006-07.