Quantifying the Opportunity Cost of New Zealand's Mineral Potential

Recent studies carried out to support the development of a strategy for the New Zealand mineral industry by the NZ Minerals Industry Association have included investigations of mineral potential, and the development of scenarios for realising this countryÆs mineral potential by 2010. New economic research is applying a general equilibrium model to quantify the opportunity cost of this potential. The model analyses separately four categories of land (private land and three categories of Crown land) and identifies four distinct mineral classes û precious metals, industrial minerals, coal and aggregate. It investigates the economic effect of the increased availability of mineral resources on the mining industry itself, on other industry sectors and on the NZ economy generally, including its impact on unemployment, GDP and household welfare.The analyses suggest that increases in the level of GDP of between 1.9 per cent and 3.4 per cent may be obtained by utilising New ZealandÆs mineral wealth to varying degrees. The mineral industry sectors are significant beneficiaries under all scenarios; mineral output increases by between two and five times its current level. However, the flow-on effects to the rest of the economy, and to households, are also significant. The analyses show that household income, adjusted for changes in consumer prices, can be expected to increase by between 1.6 per cent and 2.7 per cent. This results largely from increased employment.