The mining investment boom's unwind without a recession

Mining investment surged from a pre-boom average of about 2% of GDP to a peak just under 8% around mid-2012, driven by China's industrialization pushing commodity prices up roughly 85% from the early 2000s to late 2011. When Chinese real estate investment and steel demand cooled and global supply caught up, Australia's terms of trade fell faster than the Reserve Bank had forecast, with repeated downward revisions between 2012 and 2015; by 2015-16 the terms of trade were declining at an annual rate of 8.5%, reversing the roughly 7% average annual gains of the boom years. In a September 2016 speech, Assistant Governor Christopher Kent described how the economy absorbed this reversal without a recession: the Australian dollar depreciated steadily from early 2013, improving competitiveness for trade-exposed industries, wage growth slowed sharply across every sector (nominal unit labour cost growth fell to about 0.25% a year between 2012 and 2016, from 3.5% during the boom), and the Reserve Bank cut the cash rate repeatedly to support non-mining activity. Unemployment rose only modestly above 6% before beginning to fall again, an adjustment Kent called relatively smooth by international standards.