Quantifying Australia's 'Three Speed' Boom

CAMA Working Paper No. 10/2013

42 Pages Posted: 22 Feb 2013

See all articles by Aaron Walker

Aaron Walker

Reserve Bank of Australia

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: February 1, 2013

Abstract

This paper examines Australia’s terms of trade boom since 2003 with a particular interest in quantifying the links between the terms of trade and sectoral performance and identifying an associated ‘secondary services boom’. Comparative static general equilibrium modelling and empirical analysis are used to examine the sectoral impacts on employment and income. The modelling confirms the services expansion of sufficient scale to tighten national labour markets and it projects an associated manufacturing contraction. A separate empirical analysis approaches the same links using vector auto-regressions estimated from pre-boom Australian data (1989 through 2002) and out of sample simulations over the subsequent boom period. The secondary services boom appears clearly but the results on manufacturing are ambiguous. Actual employment booms were larger, and manufacturing sector performance better, than predicted on the estimated VARs, suggesting that the recent boom accompanied changes in industrial structure and underlying behavioural parameters that have been favourable to surviving manufacturing firms.

Keywords: resources boom, Dutch disease, general equilibrium, mining, secondary services boom, response asymmetry

JEL Classification: C32, C53, C68, E17, F47

Suggested Citation

Walker, Aaron and Tyers, Rod, Quantifying Australia's 'Three Speed' Boom (February 1, 2013). CAMA Working Paper No. 10/2013, Available at SSRN: https://ssrn.com/abstract=2222344 or http://dx.doi.org/10.2139/ssrn.2222344

Aaron Walker (Contact Author)

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

Rod Tyers

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

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