But a top private equity boss believes the boom was a “hollow” event that instead has been disruptive for the country especially now that the boom days are over.
Tim Sims, managing director of Pacific Equity Partners, said international investors are often confused and see Australia as an economy based solely on mining, and now an economy that has gone from a once in a century boom to bust.
As a result, he worries that investors are in “wait and see” mode in the belief that Australia is exposed to risks.
“The most worrying thing is a misunderstanding among the international investment community about the experience we’ve just been through,” Mr Sims told the ABC’s AM program.
“The story that you hear in the international markets is, ‘Oh, Australia: mining economy’, which forgets that mining is only 10 per cent of our economy and 2 per cent of our employed people.
“The next part of the story you hear is, ‘You’ve been through a boom, haven’t you, and now it’s a bust?'”
Mr Sims says the local obsession with the resources boom and the global perception of Australia’s reliance on commodities distorts the true makeup of Australia’s economy.
“The false impressions are number one that yes, Australia is a great big mine, and the reality is that only 10 per cent of our GDP and less than 2 per cent of our employed population are working in the mining industry,” Mr Sims reiterated.
“The second thing is the wrong impression about our vulnerability to China. China is 5 per cent of our GDP output. In fact, fires and floods and earthquakes have had more impact on GDP than fluctuations in China demand has had.”
Tim Sims said that, while the mining boom was undoubtedly good for Australia and the Government’s Treasury coffers from corporate tax receipts, the reality for the non-mining sector was very different.
“It was very difficult for non-resource businesses. We had pressure on the cost of unskilled labour; we had extraordinary movements in the exchange rate,” Mr Sims said.
Mining boom four times bigger than Marshall Plan: Sims
But he said that now that the investment phase of the mining boom is largely complete the extraordinary investment should set Australia up in the production phase.
“Australian mining companies invested four times the amount of money that was invested in Europe after the Second World War under the Marshall Plan and this again is something that people haven’t focused on, haven’t given the nation credit for,” he added.
The Marshall Plan was the massive US-funded post-war reconstruction effort that rebuilt Western Europe’s economy after the devastation of World War Two.
Tim Sims also believes Australia’s perceived reliance on resources trade with China is overblown.
“China demand conceptually could fall and so you have to paint a catastrophic position for the Chinese economy for them to shrink to a point where they buy less than a third of their total needs today, which is what it would take to impact on the first dollar of low cost,” he argued.
He predicts the exchange rate will continue to fall and that Australia will soon become the biggest exporter of LNG (liquefied natural gas), rivalling Qatar.
Mr Sims warned that Australia should not send the message to international investors that the end of the mining boom is a crisis for the local economy.
“It was an aberration. Iron ore prices are still at a healthy place relative to where they were in 2007, but we’re back to a new norm in that regard, and so I think we’ve got a lot to look forward to as an economy,” he concluded.