Friday, June 14, 2013

More on Australia's "Dutch Disease"

I've blogged earlier, here and here, about the skewed growth of the Australian economy, pointing to the resource mis-allocation caused by the strong performance of the commodities sector. Riding on the back of China's insatiable appetite for minerals, the Australian economy has surged ahead during the first decade of the millennium.

Here are two excellent graphics that capture the essence of Australia's version of the "Dutch Disease". The first graphic shows that the increased price of its major exports - coal and iron ore - has been the dominant contributor to its economic growth in the 2000s.

Tsy - ToT contribution to income growth
The second graphic shows the sharp rise in investments in mining sector. Mining, which forms just 10% of the GDP, has sucked up nearly 70% of the capital expenditure in the economy.
ScreenHunter_34 Jun. 13 04.59

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