Lucky Country era ending as commodity prices set to tumble
Analysis by Westpac senior economist Pat Bustamante found mining delivered more than 50 per cent of the gains in Australians' living standards for the two decades until 2020.
But this will come to an end as falling commodity prices and a lack of investment from the miners themselves means Australia will no longer be the 'Lucky Country.'
'Without change, Australians are in for a period of anaemic growth in living standards over the next decade,' Mr Bustamante wrote in an economic note.
'This will cost the average Australian $75,000 in income over the next decade.'
While living standards is not a direct measurement of how much every Aussie pockets, it does give an indication of the income available to every country's resident by dividing total income by total people.
Mr Bustamante said the contribution mining had made to Australians' living standards had been primarily driven by rising export prices with iron ore which soared in recent decades.
But Westpac says the price of iron ore which is around $US103 a tonne today will slide to $US84 by 2027.
'And while we don't all 'work in the industry', we benefit indirectly from the demand for ancillary services, the investment undertaken by the industry, including in infrastructure like roads and ports, and the tax paid by the industry,' he said.
'Indeed, a large reason why the federal government and the mining states have been able to provide cost of living support, and increase the scope of public services, without becoming heavily indebted is because of the windfalls provided by the mining industry.'
But Westpac warns mining investment 'stalled' in post 2008 and another commodities super cycle is unlikely to occur.
Despite the warning, Mr Bustamante said Australia could offset the falling commodity prices if there is an uptick in productivity.
'Even without the 'free kick' from mineral export prices, productivity and growth in living standards can be put on a sound trajectory,' he said.
'But this requires changes in business practices, policy and culture, which will allow us to benefit from the technological advances already happening and in train.'
Treasurer Jim Chalmers has identified improving productivity as a major focus for the Albanese government's second term.
Mr Chalmers will host an economic reform roundtable on August 19 to 21 to look at improving productivity, enhancing economic resilience and strengthening budget sustainability.
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