Mining was minor but Rudd saved economy, Treasury says

NEW Treasury analysis has undermined the often-repeated claim that mining kept Australia afloat during the depths of the global financial crisis, finding the sector only played a minor role.

Treasury says service industries such as retail - which

received a hefty boost from Kevin Rudd's stimulus package - were crucial in sustaining the economy during its darkest days.

In a paper published today, Treasury economists assess the contribution of different sectors between September 2008 and March 2009, when the economy grew by just 0.3 per cent.

Contrary to the mining industry's claim it propped up Australia during the world recession, the report said mining added a modest 0.1 percentage points to economic growth over the nine-month period.

Agriculture and services each contributed 0.3 percentage points - three times as much as mining. Manufacturing was the worst performing industry, detracting 1.1 per cent from the economy's performance.

The Treasury analysis is at odds with mining industry arguments it shielded Australia from the global recession of 2008-09, a claim repeated during the campaign against Kevin Rudd's ill-fated mining ''super profits'' tax.

''Everybody knows we were the bedrock of getting Australia through the global financial crisis,'' the Minerals Council of Australia chief executive, Mitch Hooke, said in May 2010.

Treasury found retail was a stand-out performer during the crisis compared with other countries.

''By March 2009 Australia's retail trade was around 6 per cent higher than its pre-crisis level. Advanced countries' retail trade was about 3.7 per cent lower,'' Treasury said.

''It seems reasonable that the relatively large fiscal and monetary stimulus in Australia was at least partly behind this divergence.''

The housing industry also bucked overseas weakness, helped by hand-outs to first home buyers and a plunge in official interest rates, which were slashed to 4 per cent.

''While the pace of housing credit slowed, Australian banks continued to provide finance to new housing investment,'' Treasury said.

Mineral exports to China were still important, Treasury said, but were not enough to offset a broader slump in commodity exports.

Exports of non-rural commodities tanked, with metal ores down 6.4 per cent for the quarter and coal down by 16 per cent as trade partners slowed.

If not for China's heavy buying of coal and iron ore - the nation's two biggest exports - Treasury said the slump would have been worse.

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