Once extraneous variables such as deposit quality and capital lag effects are accounted for, Australia’s mining sector productivity improved at a steady rate of 2.5 per cent over the last few decades, according to a new report released by the Bureau of Resources and Energy Economics (BREE).

In releasing the Discussion Paper, BREE’s Executive Director and Chief Economist, Professor Quentin Grafton said, “The study finds that after removing the influence of deposit quality depletion and production lags, Australia mining productivity grew at a positive rate over the past decade, albeit at a slower rate than in the 1990s”.

After this adjustment, the multifactor productivity (MFP) growth rate in Australian mining rises from an average annual unadjusted rate of negative 0.65 per cent to a positive rate of 2.5 per cent between 1985-86 and 2009-10.

The study finds that the deteriorating unadjusted productivity performance in mining over the past decade appears to be a result of the strength of resource prices, and investment decisions by mining companies. “Possible reasons for a slowdown in Australian mining productivity in the 2000s include: transition to lower yielding resources, inefficiencies of vintage capital, output-input lags, the lumpy nature of mining investment, and high commodity prices that place a priority on rates of extraction rather than costs of extraction,” Professor Grafton said.

The full report can be found here