The Influence of Increasing Demand on Australian Ironore

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The strong export and demand of iron-ore boost Australia's economic growth, and change the labor market. Australia is the world's third-largest minerals producers, Australian ore mining is mainly used for export, nearly account for 80 %(Qiang Ye, 2007).This essay will firstly discuss the influence of the demand for iron-ore to the demand and the supply of Australia.Following this, it will analyze that labor supply market has alternative influence in iron-ore supply. Finally, it will emphasize that adjust the wage rates of mining workers in cities and issues needing to attention.

The changes of the demand and the supply in Australian iron-ore market

The demand and supply of Australia iron-ore is affected by the export. The demand reflects relationship between the price level and demand amount, while the supply reflects relationship between the price level and supply amount. The rapid growth of the Chinese economy has resulted in a surge in demand for many minerals .In turn; the strong demand will affect the Australia iron-ore demand and supply changes. As shown, the initial balance of supply and demand is the production of Y* and the price P*, Without considering other factors, such as costs and inflation, as the increase in foreign demand, resulting in the demand curve upward, so the price rises to P', the rise in price would inevitably lead to increase in the supply of iron-ore, the supply curve also occurred the right move to S', output increased to Y*, The demand curve and supply curve equal range of movement, when the demand and the supply of factors did not change so the price remain unchanged, But the output increase.

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Figure 1 The changes of the demand and the supply in iron-ore market

Rising wages lead the iron-ore producers to find input substitution, the market need government intervention to adjust the wage rates of mining.Because workers do not want to leave the city or to leave their homes, so in order to hire workers, the mining sector must raise wages. As wages raise, the cost of supply of companies increase; the range of the supply curve toward the right will be less than the range of the demand curve upward, the price of iron-ore is raised. As shown in figure 1, the supply curve from S to move to S'', the price increased from the P* to P', output was reduced from the previous balance Y ' to Y'', the rising in wages decline the output which is Y'-Y''. So the rising cost drive the price up , also reduce production, make the market invalid to lost production of Y'-Y''. At the same time, when the Australian iron-ore production costs rise, companies will find other ways to reduce costs, such as put more capital to purchase of machinery in order to replace demand of labors, but it affect the employment of workers in Australia. So the government needs to adjust wage rates of the mining industry and workers in other industries for adjust the mining economy effectively (Nauman Ilias, 2006). That is to say, solve Australian employment, also develop economic.

The features of jobs in the mining sector and the impact of the changes on wage rates

Mining industry is such a labor-intensive and high risk industries that require a lot of workers with high wages which need to adjust suitably. Miners have long-term to exposure harmful factors (such as dust, noise) and adverse weather conditions, combined with extraordinary intensity work and hours of work, it lead to a variety of chronic diseases easily. So mining is an industry of labor intensive and high risk. Meanwhile, Australia's mining industry is in remote areas. So, when there is no lager difference on the wage between the miners and other industries workers, much of workers do not want to far away large cities for mining minerals. Therefore, in view of the special features of the mining industry, hiring enough workers require much high wages. Geographical remoteness and the high risk must be considered to adjust the wage rate for workers in mining. Without considering the special backward-bending labor supply curve, labor supply is proportional to the wage rate (Svend, Jakob&Lars, 2008). The higher wage rates, the more labor supply. So if dramatically adjust mining the salaries of the workers will attract a large number of mining workers. However, other industries will be forced to raise wages and the production costs increasing, higher prices, lower yields; the whole community is affected seriously. Because the high wage rate lead to high cost of mining producers, they reduce the demand of labors and seek other substitutes. Finally, the number of unemployment increase. However, because of the special nature of mining employment, the low wage rate can not employ workers. Therefore, the government adjust the wage rate of mining workers should be carefully weighed these two issues, taking into account the impact on other sectors, especially labor-intensive industries, and the economic development of mining. The government can take measures such as tax subsidies or export tax rebates to compensate for the cost of hiring high wage workers of the mining producers, also meet the needs of miners bearing the high-wage compensation for high-risk desire (Edward and Paul, 2004; Nguyen, Tran&Madanmohan & John,2005).

Conclusion

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In conclusion, the increase in demand for iron-ore led to the increase in Australian iron-ore supply, the increase in iron-ore supply change the supply of labor market in the Australian domestic. The mining industry is labor-intensive high-risk industry by analyzing. Government intervention is needed to adjust the wage rates of the mining industry workers in order to allocate the social resources effectively. However, the policy in the regulation of wages need to be taken carefully .The high wage rate will increase the burden on mining companies to seek alternatives to labor, at the same time ,the workers with high wage in other industries increase the cost of other products. But if the wage rate is too low, enough workers will not be able to be hired. Therefore, government needs to take appropriate adjustments to wage rates. This essay proposes two ways of export subsidies and export tax rebate to solve the problems.