The macro-economic environment is shifting; or, in simpler terms, the rules of the game will soon change, as many of Australia’s Western allies now stare down gloomy economic predictions of coming recessions. At a time of pessimistic outlooks, Australian miners should be cautious, but not overly worried; many of the coming troubles will only graze the industry.

And while economists forecast a rainy day, in some ways the weather will turn for the better. The Bureau of Meteorology recently forecast the end to the La Niña weather pattern, which will mean a return to more average weather conditions. This is likely to reduce the risk of a repeat of the flooding that devastated parts of Victoria, New South Wales and Tasmania, and serves as an effective metaphor for the future of Australian mining.

Yet, as with most forecasts for the industry, this is at best a mixed blessing, in that it brings the country back towards drought and wildfires. With both external uncertainty and domestic changes, Australian mining may well endure the current economic challenges, but be fundamentally changed in the long-term.

Avoiding recession

The Reserve Bank of Australia’s governor of monetary policy decision Philip Lowe said at the start of November: “One source of uncertainty is the outlook for the global economy, which has deteriorated over recent months. Another is how household spending in Australia responds to the tighter financial conditions.”

As a result of several factors, economists believe most European countries and the US will likely enter a prolonged economic downturn. For some countries, such as the UK, this will likely be the worst downturn in more than a century. In this time, employment will fall, real-terms GDP will decline, and markets will buckle.

Australian treasurer Jim Chalmers recently told an ABC Q&A audience: “Europe will, and the UK will, [enter a recession]. Other countries are at risk as well. And we won’t be completely immune from that. When the global economy turns down, substantially, as it did almost 15 years ago, as it did a couple of years ago, we can’t completely escape the consequences of that, but … I don’t expect us to go into recession.”

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Thankfully, many economists agree. The Reserve Bank of Australia said in September that the country can still avoid recession thanks to its low levels of unemployment. This keeps workers in demand, wages high, and wealth in the hands of the public.

In June, the Organisation for Economic Co-operation and Development predicted Australia’s real GDP would rise by 4.2% in 2022 and 2.5% in 2023. While this prediction may not have accommodated more recent developments, and the figures are relatively low compared to historic numbers, they are still stronger than forecasts for many other nations.

The Conference Board, a US-based think tank, estimates that the US GDP growth rate will fall to 0% by 2023, while Trading Economics estimates the US growth rate will hit just 1.2%.

“We will feel the economic impact in Australia”

But Chalmers also told questioners: “Our economy will slow quite substantially next year as a consequence of the global downturn, the impact of higher interest rates, and some other issues as well. Over the next six, 12 or 18 months, we are in for some very tricky terrain from a global point of view. And we will feel the impact here.”

The biggest cause of Europe’s downturn lies in the overhaul of the continent’s energy sources as a result of economic conflict between Europe and Russia. Regardless of the ongoing war in Ukraine, Europe will never happily return to the embrace of Russian oil and gas. This will lead to a multi-year transition to other energy sources, with an uncertain economic situation until the war ends and supply gaps are closed.

The fall in employment and wages in Europe may suppress demand for goods, with its own ramifications for the price of mined commodities. The push for energy conservation will also affect industrial productivity across Europe, with further ramifications for its mineral feedstocks. But for some commodities, such as nickel, markets cannot reasonably become any more disrupted even if disruption was their goal.

Downturns often result in companies cutting staff, resulting in workers accepting lower salaries over coming years. Despite its low unemployment, this may ultimately also be the case in Australia. Alongside this, inflation will continue to rise at a breakneck speed, making goods cost more for both businesses and their employees.

But Australian miners have ignored the global trend before. During the 2008 financial crisis, employment in mining actually rose by approximately 25,000, figures from the Australian Bureau of Statistics show. This mini-boom in hiring was short-lived, but massively contradicted global economic pessimism, as the considerable mineral reserves and strong mining industry in Australia offer the country a degree of resilience in uncertain economic times.

Exposure to China

The Reserve Bank of Australia has also noted that Australia’s “relatively large exposure to the buoyant Chinese economy” aided the country’s recovery from the 2008 crisis.

However, this same exposure to China now presents a risk. China’s ban on Australian coal imports has decreased trade between the two countries, but mining exports to China still represented more than $70bn (A$110bn) in 2020 according to the Observatory of Economic Complexity.

Recent economic results from China either fell below predictions, or remained entirely unpublished. In October, China delayed the quarterly release of economic statistics, including its GDP, citing a focus on its national conference. Now, financiers have started downgraded their growth expectations for the country, with Barclays bank expecting China’s exports to fall between 2% and 5% next year.

There are several causes of this fall, beginning with the reduced European demand for goods. Given China’s manufacturing dominance, this is just one extended ramification of Europe’s downturn.

Alongside this, while the country has somewhat moved on from the power generation difficulties that it faced during 2021, its effects on manufacturing still echo. The country’s maintenance of a zero-Covid-19 policy at work has meant frequent lockdowns, furthering economic disruption in ways that will likely be felt in Australia.

The Voice to Parliament

The frequent clashes between miners the rights and beliefs of indigenous Australians are well-documented. Take for example the destruction of Juukan Gorge by Rio Tinto, or the disposal of cultural artifacts at Marandoo Mine. From next year, it is possible that no mining company will have such a significant impact over such matters, as the national government considers giving indigenous peoples a “voice to parliament”.

If supported in a referendum vaguely scheduled for next year, an amendment to Australia’s constitution would give indigenous groups a consultative right to weigh in on national policy. In July, Prime Minister Anthony Albanese told indigenous peoples at the Garma Festival: “It’s not a matter of special treatment, or preferential power. It’s about consulting Aboriginal and Torres Strait Islander peoples on the decisions that affect you. This is simple courtesy, it is common decency.”

There is nothing in the foundations of the Voice to suggest that it would threaten miners, only that the ancient and ancestral sovereignty of the land be respected. The Voice original proposing document, the Uluru Statement from the Heart, reads as follows: “[Indigenous] sovereignty is a spiritual notion: the ancestral tie between the land, or ‘mother nature’, and the Aboriginal and Torres Strait Islander peoples who were born therefrom, remain attached thereto, and must one day return thither to be united with our ancestors.

“This link is the basis of the ownership of the soil, or better, of sovereignty. It has never been ceded or extinguished, and co-exists with the sovereignty of the crown.”

Of course, it remains to be seen how this new initiative, if it even comes to pass, will affect Australian culture in general and mining in particular. Yet this could be the most lasting impact on mining in the country, as a re-evaluation of the relations between miners and the people on whose land they operate could fundamentally change the mining industry as a whole.