Is the Australian mining industry’s next downturn just around the corner? And what does it mean for mining jobs?
Let’s look at the economic context first. Both globally and here at home, economic conditions are not great. Interest rates and the inflation rate are both going up. Household energy prices, including the cost of petrol at the bowser, are going up. The economy is still dealing with the fallout of both the war in Ukraine and the pandemic. China’s approach to Covid-19, with strict lockdowns, has played havoc with demand for iron ore, steel, coal and other commodities. There’s talk the Australian economy could be heading for recession.
But there’s always mining, right? Isn’t the strength of our resources industry part of the reason Australia managed to ride out the Global Financial Crisis in 2008/9 without dipping into recession? (The rest of the world, by the way, doesn’t call it “the GFC”. The rest of the world refers to it as “the recession”.)
Will mining save the economy?
Recent analysis in the Guardian shows Australia’s post-pandemic economic recovery is coming not off the back of mining investment and high-paying jobs, but actually on the back of wages falling in real terms. The real income of people fell 3.2% in the 12 months to March 2022, meaning incomes are now back at the level they were in September 2014. So, if it feels like you’re going backwards, chances are, you are.
While mining has been the Australian economy’s saviour in the past, there are signs the industry is headed for a downturn. A recent article in Mining News referenced something called the Lion Clock, which is a bit like the Doomsday Clock but instead of tracking global annihilation, it follows mining’s boom-and-bust super-cycle.
On the clock, from 6 to 12 is an upturn and from 12 to 6 indicates a downturn. The last time the clock was at 6 (or rock bottom) was 2016. Then the hand started to climb. A year ago, the clock was already at 11. Last month, it was at 11.30. What does that mean? Here’s how Mining News’ analysis put it:
“No one is suggesting that we’re about to dive back to the 2016 low point but we are certain to enter a different phase of the market, a time when money gets harder to raise, new floats dry up, mergers suddenly become fashionable as a way of preserving capital, and consolidation is the name of the game among explorers.”
A shift in mining’s investment cycle has already begun
In other words, everything is becoming more expensive (from the cost of borrowing money to the input costs of exploration and production, like fuel prices), so mining companies have to find ways to save pennies. At the same time, investors will also be more cautious about where they splash their capital.
Suddenly, it’s easy to see how we’ve arrived at 11.30pm on the Lion Clock.
This isn’t theoretical. It’s already happening. Mining News cites the recent friendly share-swap merger of Bardoc Gold and St Barbara. More recently, the Black Cat Syndicate became the latest gold miner to defer construction plans. If you want the data, just 2.6% of GDP in the March quarter was spent on mining investment, down from 9.5% at the peak of the mining boom.
Mining output is also dropping. It’s down to 9.9% as a share of GDP, compared to 11.5% at the height of the pandemic. That’s its lowest level since 2015, just before the last bust cycle.
What does this all mean for mining jobs?
So, what does all this mean for mining jobs? Quite probably, the jobs market will cool along with the industry’s fortunes. But is this necessarily a bad thing?
The fact is the mining industry has been struggling with a skilled labour shortage for several years now. According to Australian Bureau of Statistics data, the current vacancy rate in the industry is 4.8% (that’s the proportion of jobs mining companies have been unable to fill). That’s much higher than any other industry (finance is next on 3.8%, retail trade is at 2%, for example).
A downturn that affects the investment cycle might just take some of the heat out of the skills shortage. While in the short term that could see an increase in the number of people leaving the mining industry, there will always be opportunities for good, skilled, well-qualified people.
In the meantime, though, the unemployment rate is still incredibly low (2.9% in WA, 3.9% nationally), there’s still a massive squeeze on labour, and Covid-19 is only making things worse, as employees take sick leave. It’s going to be a bumpy road for a while longer.
Be prepared to compete for mining jobs based on skills and experience
These are precarious and unpredictable economic times, for employees, for households, for mining companies and the industry as a whole. If there’s half an hour until midnight on the Lion Clock, it would be a mistake to think massive changes aren’t already taking place to adjust to the conditions that are coming down the line.
For mining companies, some of the heat leaving the competition for labour will be a welcome shift in market conditions. They’ll be focused on keeping and attracting the best people, to take them through until the next boom. For those who work in the industry, there will still be fantastic opportunities available — you might just have to compete a little harder, and sell yourself a little better, to land the role you want.
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