2. Strengths and challenges for regional development in the Pilbara
The Pilbara region, located in the northwest of Australia, is characterised by remoteness, a high degree of specialisation in mining and other extractive activities and as being home to an important share of First Nations peoples. This chapter compares the performance of the Pilbara across a number of economic, social and environmental indicators with other similar OECD regions. This comparison provides a good basis for identifying strengths and bottlenecks in the region.
The Pilbara, located in the northwest of the state of Western Australia, is a large region known for its environmental amenities, a significant proportion of First Nations population with cultural, spiritual and kinship ties and its thriving mining and resource extraction industries, which have played an important role in the development of the Australian economy. The region’s geographic size broadly corresponds to the size of Spain but with 780 times less population (a total of approximately 58 000 inhabitants in 2021). These features place the Pilbara as one of the lowest densely populated regions amongst the OECD, with 0.17 persons per square kilometre (km²) against an average of 30 for OECD rural regions. The cities of Karratha, Newman and Port Hedland are home to most of the residents and services in the region.
Despite its low population and density, the Pilbara is an economic powerhouse in the state of Western Australia and the country. The regional economic output represents 19.2% of Western Australia’s and 3.4% of Australia’s output; this is about 15 times higher than its population share (0.2% of the country). The regional output is driven by an extractive and export-oriented economy (86.9% of the total), contributing to 31.5% of Western Australia’s exports. This makes the Pilbara one of the largest contributors to the state tax revenue, providing 91% of the royalties received by Western Australia. This economy’s strong performance is coupled with an unemployment rate that is almost 3 times lower (1.8% in December 2022) than the average across the OECD (4.9%), mainly driven by strong mining labour demand.
However, the Pilbara’s economic wealth mainly relies on a single economic activity, the mining and extractive industry, which is vulnerable to changes in international commodity prices. Thus, its regional economy is highly volatile, which is reflected in marked periods of boom and bust in gross domestic product (GDP) growth over the last two decades. Such volatility has nurtured a significant reliance on the fly-in fly-out (FIFO) workforce, which has exacerbated a number of well-being challenges locally, including access to affordable housing, quality education and childcare provision, and high shares of greenhouse gas (GHG) emissions derived from transportation and mining operations.
The analysis in this chapter compares economic, social, and environmental trends in the Pilbara to other Western Australian regions and the Australian average. To make meaningful comparisons, the chapter also identifies three groups of selected OECD regions with similar characteristics to the Pilbara to identify challenges and untapped opportunities in the region.
Main takeaways
Economy
The Pilbara is of economic relevance both for the region and the country, representing 19.2% of Western Australia’s gross state product and 3.4% of Australia’s GDP in 2021.
During 2012-20, the Pilbara’s economy grew (4%), almost twice as fast as the national average (2.2%). This growth is driven primarily by mining activities, which have created about 30 000 direct jobs (52% of the total in the region) to this date. The Pilbara accounts for 94% of Australia’s iron ore export (total valued at AUD 60.2 billion) and 60% of the country’s natural gas production.
The Pilbara is the region with the highest single contribution to Western Australia’s exports (31.5%) and a high contributor to total regional exports generated in Australia (11.5%). The region’s strong economic performance also exhibits a significantly lower unemployment rate (1.8% in December 2022) than compared to the OECD average (4.9%).
Mining is the Pilbara Region’s largest output output-generating sector, supporting an estimated annual output of AUD$ 88.055 billion and provides providing employment to approximately 31 500 people as of 2022. Its iron ore and liquefied natural gas industries are valued at over $70 billion, representing more than 70 per cent of mineral and energy production in Western Australia.
However, the Pilbara’s growth performance has experienced high levels of volatility (deviation coefficient of GDP growth of 40% between 2008 and 2020), 4 times above the national average (10%).
Such volatility is explained by limited economic diversification in the region inside and outside mining activities. The mining exports rely on a few trade partners and one main product, iron ore, making the region vulnerable to fluctuations in global commodity prices. Furthermore, value-added manufacturing or service activities are marginal in the region. It places the Pilbara as the least diversified region across the sample of the 50 OECD regions specialised in mining (2 042 on the Herfindahl-Hirschman Index which corresponds to a low-diversified region).
After the direct contribution of the mining sector, other sectors that generate wealth and jobs in the region that are also linked to mining include construction (AUD 3.2 million, 6.8% of the total and 6 569 jobs) and logistics (AUD 705 000, 1.5% and 2 872 jobs).
Non-tradeable service businesses have experienced growth over the last decade, especially in the tourism sector, which already contributed AUD 249 million to the regional economy in 2021 (0.5% of the total). However, although there are other sectors that have the potential to involve local and Aboriginal communities, they currently represent a small share of the labour market. These sectors, such as arts and recreation, have lower productivity compared to mining and generate only 176 jobs.
The Pilbara region has 73 mining companies operating in the region but only 31 are locally registered. However, most of the mining companies registered in the region employ fewer than four employees, indicating that most of the big companies are registered elsewhere, which means missed opportunities for fiscal income locally. Further, research and development (R&D) is concentrated in big companies, while the other 9 200 businesses are small and medium-sized enterprises (SMEs) with a lower capacity to innovate.
Social
The Pilbara population has a median age of 33 years. It has grown an annual average of 0.7% between 2010 and 2020, higher than the OECD mining region benchmark (0.2%), similar to the OECD average and relatively lower than Australia (1.6%).
There are a great number of young, mining-focused FIFO workers. Since 2011, FIFO has increased by around 400%1 (from 3 261 to 13 384), much faster than the share of permanent residents. This FIFO working culture has allowed extractive companies access to a diverse pool of skilled workers from elsewhere but has brought a number of challenges for local well-being standards, particularly in the domains of affordable housing and service provision. Further, there is also a significant imbalance in the proportion of men to women in the workforce (60-40), with women playing a smaller economic role.
A main challenge for permanent living in the Pilbara region is the shortage of affordable housing, with cost pressures similar to those in some densely populated metropolitan OECD regions. The challenges in the Pilbara’s housing market are associated with the cyclical economic growth that leads to a volatile residential property market with high construction costs and a complex land tenure. This scarcity of affordable housing is accentuated by the FIFO working culture, with extractive companies owning many of the houses in the region for the itinerant workforce, with only 16 000 people privately owning their homes.
Health, education, and income inequality is relatively high in the Pilbara, particularly among First Nations peoples, who make up 14% of the total population and face considerable social and economic disadvantages. The life expectancy of First Nations people in the region is, on average, ten years shorter than non-First Nations people, partly due to a preventable hospitalisation rate that is more than five times higher than that of non-First Nations residents. These disparities suggest that First Nations people in the Pilbara may face challenges in accessing adequate healthcare and other essential services.
Environment
The level of commuting is high in the region, which implies high GHG emissions from the transport sector. Approximately 30 000 workers commute between Perth and the Pilbara for 2-week shifts in the mines. This has a significant environmental impact due to the carbon footprint of their travels, which typically involve an average of two hours of air travel each way. This highlights the need for addressing the environmental consequences of such a carbon-intensive commuting system in the region.
The Pilbara generates higher GHG emissions from electricity generation and from its mining value chain (power, industry, and transport sectors) than the benchmark of OECD mining regions. Therefore, developing renewable energy sources is a great opportunity to create new industries while reducing GHG emissions and supporting sustainable development.
In recent years, efforts have been made to implement green mining initiatives in the Pilbara, including recycling rubber and other waste on site and electrification. The next chapter will discuss these initiatives.
Overall, the Pilbara region of Western Australia stands out with its economic performance, competitive mining sector and port infrastructure, playing a crucial role in the country’s economy. However, the regional economy faces diversification challenges, with a slender internal economy in terms of SMEs, women’s participation in the workforce and entrepreneurship. This is coupled with well-being challenges, including housing affordability, quality service provision and important inequalities with First Nations peoples in income and others dimensions of well-being. The Pilbara also faces environmental challenges, such as high GHG emissions.
In the upcoming chapters, the report will provide policy recommendations to leverage the region’s strengths while addressing the bottlenecks and challenges. The aim of the report is to ensure that the Pilbara continues to thrive economically, socially, and environmentally while creating more diverse and sustainable opportunities for its residents.
This chapter offers a comprehensive diagnosis of the Pilbara region in the state of Western Australia. The chapter compares the Pilbara’s development against national trends and a benchmark of other OECD mining regions at Territorial Level 2 (TL2) and Territorial Level 3 (TL3) (see OECD Toolkit to measure well-being in mining regions (OECD, 2023[1])). Based on these comparisons, the analysis identifies major strengths and bottlenecks in the Pilbara’s development and well-being. While mining is the main contributor to the region’s gross regional product (GRP) and employment, this diagnosis reveals the relevance of leveraging the Pilbara’s mining potential to create a prosperous and sustainable future.
The chapter first describes the mining sector in the Australian and Pilbara context. It then examines the demographic patterns in the region, followed by its main economic trends. The final section of the chapter examines the main factors for regional development, including the quality of life of its citizens.
The Pilbara region is a crucial component of the Australian economy, as it possesses an array of mineral and hydrocarbon resources, such as iron ore, natural gas, lithium, and gold. Nevertheless, the area’s economic fortunes are tied solely to the mining and extractive industry, which is exposed to fluctuations in global commodity prices. This sector is also heavily reliant on FIFO workers, which has resulted in significant challenges concerning access to affordable housing, quality education and childcare, as well as high levels of GHG emissions from transportation.
The region also has opportunities emerging from these challenges, including the potential for infrastructure development and innovative solutions to address inequality. In this context, this chapter explores the key challenges and opportunities facing the Pilbara region and provides takeaways for sustainable development.
The geographically concentrated nature of mining leads to a highly specialised economy, bringing with it challenges and opportunities to mining regions and the well-being of its inhabitants. Global megatrends, including demographic change, climate change and the transition to a low-carbon economy, as well as digitalisation and automation, are transforming industries and societies. These megatrends are also bringing new challenges and opportunities to the development of mining regions (Table 2.1).
The article discusses the challenges faced by mining environments in the Pilbara region, including demographic challenges and environmental concerns. However, the region’s mining sector has the potential to address these challenges through workforce availability, gender balance, high retention capacity and the supply of minerals and materials needed for green technologies. Technological change and digitalisation can also increase productivity and sustainability in mining activities. The impact of these megatrends on mining municipalities in the Pilbara will depend on policy responses to address changes and prepare firms and communities for the future.
The Pilbara is a vast area located in the northwest of the state of Western Australia. Home to First Nations communities for likely over 50 000 years (Webb, 2003[2]), it remains relatively unknown to many. However, its rich natural resources – particularly an abundance of iron ore – have attracted the attention of miners since the early 1960s. Covering 507 896 km² (around 20% of Western Australia or equivalent to Spain’s total land mass), the Pilbara has a residential population of around 58 000 people. The Pilbara is one of the least densely populated regions of the OECD and the world (UN, 2021[3]; OECD, 2021[4]) and in the country (RAI, 2016[5]). In fact, the Pilbara has a population density of 0.17 people per km², even fewer than the Northern Territory of Australia (0.18), putting it in line with regions such as Greenland (Denmark) or the Yukon (Canada).
Australia is a federal country comprised of six federated states and two territories that are governed by delegation under the jurisdiction of the federal government. Each state has its own constitution, laws and a bicameral parliament with directly elected representatives (except for the state of Queensland, which only has one chamber). The state governance structure relies on a two-tier subnational government system: state and local governments, where the state government has the primary role in regional development. The Pilbara is one of the nine regions in the state of Western Australia and has four local government areas (LGAs): the Shire of Ashburton, the Shire of East Pilbara, the City of Karratha and the Town of Port Hedland, each of whom has a locally elected council and budgets for certain local decisions that are delegated by the Government of Western Australia under state legislation. The region also has the Pilbara Development Commission, the institution in charge of co-ordinating and promoting economic development and the vision and main priorities of the region in the medium and long terms. Overall, the development of the Pilbara is mainly guided by Western Australia state policies and strategies (see Chapter 3 for more information on the institutional framework).
Figure 2.1 maps these LGAs, with points showing the location of major mines across the region and the shades representing population shares. They highlight that the vast majority live in the western third of the region. Historically, iron ore companies, with the help of the state government, built new miner-focused settlements in Karratha, Pannawonica, Paraburdoo, Tom Price and Wickham for the population. The greatest onshore value of minerals and petroleum is produced in East Pilbara (50% of the total value of minerals and petroleum in the Pilbara by 2021-22), followed closely by the Shire of Ashburton (47% of the total value in the Pilbara by 2021-22). This does not account for the offshore petroleum value, which occurs on the coast of Karratha and Port Hedland and represented 38% (AUD 51.76 billion) of the total onshore mineral and petroleum value during 2021-22 (WA Goverment, 2022[6]).
Note: Population as of 2020: 13 331 in Ashburton, 10 921 in East Pilbara, 23 118 in Karratha and 15 471 in Port Hedland. Points represent active mines.
Source: ABS (2020[7]), June 2020 Gross State Product, http://www.australianminesatlas.gov.au/ (Accessed on 5 June 2022)
Source: WA Goverment (2022[6]), Western Australia Mineral and Petroleum Statistics Digest for 2021-22, http://www.dmp.wa.gov.au/Documents/About-Us-Careers/Stats_Digest_2021-22.pdf.
The Pilbara, a key mining hub that relies on a strong FIFO workforce culture
The Pilbara region of Western Australia is a significant mining region in the world, known for its vast reserves of iron ore (as well as other minerals such as gold, nickel and lithium) and its offshore production of natural gas and export of liquified natural gas (LNG). The region is home to some of the largest iron ore mines in the world and the iron ore industry is a major contributor to the Australian economy. According to data from the Western Australian government (WA Government, 2022[8]), in 2020, the Pilbara region produced 835 million tonnes of iron ore, which represented over 90% of Australia’s total iron ore production and places the region as the largest iron ore supplier in the world. Western Australia accounts for 38% of global supply in 2021, followed by Brazil (17%) (WA Government, 2022[8]). The iron ore mining value in the Pilbara region that year was around AUD 150 billion, making it a key contributor to the Australian economy (approximately 2.3% of total GDP). Furthermore, the Pilbara region also has a high potential for rare earths and other minerals such as lithium, copper and cobalt. This, combined with the existing mining industry and infrastructure, makes the region an attractive destination for mining investment.
The Pilbara, a key mining hub, is characterised by a strong FIFO workforce culture. Approximately 30 000 workers commute between Perth and the Pilbara for 2-week shifts in the mines, playing a vital role in sustaining the region’s thriving mining industry. This large FIFO workforce has become essential to the Pilbara’s economic success and development, contributing to the significant production figures and global market share. While crucial to the region’s mining operations, the FIFO culture presents unique challenges, such as the environmental impact of regular long-distance commuting (carbon emissions from air travel) and disruptions in local housing and labour markets, among others (see Chapter 4). The balance between the benefits of this workforce and the social and environmental considerations is an important aspect of understanding the region’s long-term sustainability and success.
The region is home to numerous First Nations communities
Further detailed in Chapter 4, the Pilbara region of Australia has been home to several First Nations communities with a deep connection to the land and its resources. A total of 12.9% of Pilbara's population identifies as First Nations people2, which includes individuals who identify as Aboriginal, Torres Strait Islander, or both. To break down these figures: 12.1% identify as Aboriginal, 0.4% as Torres Strait Islander, and an additional 0.4% as both Aboriginal and Torres Strait Islander (Table 2.2). Within the Pilbara region, East Pilbara has a notably higher proportion at 17.9%, compared to West Pilbara's 11.4%. The demographic profile of the Pilbara underscores its deep-rooted First Nations heritage, with a higher share of First Nations people than both the broader state average of Western Australia (3.2%) and the national average of Australia (2.9%).
These communities have lived in the region for millennia and have a unique relationship with the environment and its resources. They have a wealth of knowledge and experience when it comes to managing the land and its resources sustainably, which is of great importance in the context of mining and resource extraction. First Nations communities also play a role in preserving the cultural heritage of the region. However, the situation of First Nations people is quite unequal to that of non-First Nations people as they rank lower on many well-being indicators (see final section on First Nations well-being).
The next Sections of the report compare the Pilbara to a variety of OECD regions. Box 2.1 explains what these regions are and how they were identified.
The OECD territorial grid classifications were designed to divide regions based on a range of characteristics, including population and degree of rurality (Fadic et al., 2019[12]). OECD defines two types of regions at different geographical levels and for which comparative data are collected. The first type of region is classified as Territorial Level 2 (TL2), which is the first administrative tier of subnational government (i.e. states in the United States, estados in Mexico or régions in France). Smaller regions are classified as Territorial Level 3 (TL3), smaller territorial units that make up each TL2 region.
Whilst this is helpful guidance for comparison in many cases, the geographic extension and population density of the Pilbara calls for a particular approach to select the OECD regions for comparison. Given the OECD territorial classification, the Pilbara is still one territorial level below TL3 despite being almost its size. For example, relative to Spain, the Pilbara covers a geographic extension as large as the sum of all of the TL3 Spanish regions (Figure 2.3). The TL3 region under which the Pilbara falls is relatively large (referred to as the Western Australia Outback). Above this tier, there is the TL2 state of Western Australia. Many variables of interest do not have data available at TL3 level for a large number of countries, while most international comparable data are found at TL2 level.
To work around this issue, a proxy TL2 region was created, which contained the characteristics of the Pilbara (information gathered from data platform REMPLAN (REMPLAN, 2022[13])). This proxy TL2 was then compared to existing OECD TL2 regions to find regions that were economically similar and regions that were demographically similar. The two other Australian regions were excluded and comparisons to these were conducted using the REMPLAN database, not OECD statistics. However, for the OECD mining region benchmark, various TL3 data were combined to create a composite indicator, which was then compared against the Western Australia Outback.
1. Economically TL2 comparable regions: This group of regions was identified using a simple absolute measure of industrial specialisation, i.e., a region is considered economically specialised if a small number of industries exhibit high shares of the overall economic activity of the region. Industries are grouped into OECD classification of sections based on International Standard Industrial Classification of All Economic Activities (ISIC) rev 4 (UN, 2008[14]). Thus, the TL2 region is included in the grouping if the value-added in 1 section grouping is 40% or more of the total regional gross value added (GVA).3 The selected regions can be found in Annex Table 2.A.1.
2. Demographically comparable regions: The second grouping is formed based on population density. The Pilbara is more sparsely populated than all of the OECD regions. Therefore, this grouping was formed by taking the top 100 most sparsely populated OECD TL2 regions (see Table 2.3 for shares by country). As with the previous benchmark, Australian regions were excluded because comparisons with them are made separately using Australian databases.
3. OECD mining benchmark: The OECD toolbox has developed a benchmark of 50 TL3 mining regions to identify main trends and well-being performance at the most granular level. It allows international comparisons across a number of OECD regions that stand out thanks to their high level of mining specialisation. This benchmark intends to create a geographically balanced reference of regions that are relevant to mining activities in their own countries. Annex 2.A presents the methodology used to build this benchmark and the OECD TL3 mining regions that are part of it.
Source: OECD (2021[15]), OECD Territorial Grids August 2021, https://stats.oecd.org/. (Accessed on 10 January 2023)
Over time, the Pilbara region in Western Australia has experienced a significant evolution in its mining landscape, with mining now playing an indispensable role in the region’s economy (Box 2.2). Mining is the Pilbara region’s largest output-generating sector, supporting an estimated annual output of AUD 88 055 billion and providing employment to approximately 31 500 people as of 2022 (REMPLAN, 2023[17]). These figures represent a significant portion of the region’s economic activity and employment, highlighting the essential role mining plays in the region’s development.
From the establishment of the Swan River Colony in 1829 up until the 1960s, the sparse, arid lands of the Pilbara region were of limited interest to settlers, released convicts and subsequent generations of non-First Nations Western Australians, with local industry limited to some pastoral, pearling, fishing, gold exploration and mining activity. The following timeline sets out key policy initiatives and iron ore and petroleum development that have driven the industrialisation of the Pilbara region (Table 2.4).
The mining industry in the Pilbara region is marked by its considerable concentration, evidenced by a small number of operational companies that employ a large workforce. As of June 2022, there are 31 enterprises officially registered as mining companies within the Pilbara. Among these 31 entities, 24 reported having no employees, while 7 reported employing less than 5 individuals (REMPLAN, 2023[17]).
Beyond the sphere of these locally registered companies, the region’s mining industry is further supplemented by the operations of a larger number of companies. While not formally registered within the Pilbara, 73 such companies are actively engaged in mining operations within the region. Collectively, these companies employ over 31 500 workers, indicating their significant influence on the regional economy. This operational footprint underscores the pivotal role that these entities, although not locally registered, play in the region’s mining sector (REMPLAN, 2023[18]).
Further, investment in the mining sector transcends mining-specific competencies, like extraction and processing, catalysing a transfer of skills to a myriad of sectors (e.g., IT, Consulting). For instance, the mining sector not only serves as a pivotal job creator but also emerges as a catalyst, spurring economic advancement and diversification across other industries. Research indicates that each job birthed directly within mining engenders an additional 1.5 jobs other sectors, effectively dispersing wealth and propelling multifaceted development at the grassroots level (Deloitte, 2016[19]) (Fleming and Measham, 2014[20]). The case of Antofagasta’s mining industry exemplifies this dynamic, where its ripple effects potentially augment the national GDP by an impressive 20%, when considering its multiplier effects on various sectors (Cardemil Winkler, 2023[21]).
The structure of the Pilbara region’s economy is underscored by the diversity of sectors and businesses that contribute to it (Table 2.5). According to REMPLAN’s 2023 data, mining enterprises dominate employment in the region, with more than 31 400 jobs, but they constitute only a small fraction of the total registered businesses (REMPLAN, 2023[18]). A closer look at the region’s economic profile reveals a contrast in the proportion of businesses and employment within each sector. For example, while mining is the region’s largest employer, it represents just 1% of operating businesses. Conversely, sectors like construction, which provides 11% of jobs, and accommodation and food services, which accounts for 5% of employment, have a larger number of operating businesses in the region, 15% and 3% respectively.
Moreover, a noteworthy distinction exists between businesses operating and those officially registered in the region. For instance, in the mining sector, only 31 businesses of the 73 operating are registered in the region. Likewise, in the construction sector, 1 377 businesses are actively operating, employing over 6 500 workers, but only 475 businesses are officially registered. This trend is similar in other sectors, such as transportation (435 operating businesses for 2 872 workers vs. 207 registered) and healthcare and social assistance (427 operating for 2 259 workers vs. 118 registered). This reflects that a high share of companies that operate in the Pilbara have headquarters elsewhere, oftentimes relying on FIFO workers, which has implications for the dynamism of the local economy and link with the communities (see Chapters 3 and 4).
High value-added and less volatile sectors, such as professional, scientific, and technical services, play less relevant roles in the regional economy. These sectors, comprising 8% of operating businesses contributing 2% of jobs, promote innovation and contribute valuable services to the community. Fostering these sectors can spur sustainable economic growth, diversify the economy and job opportunities, and reduce reliance on traditional industries like mining.
Indeed, the diversity of businesses operating in the Pilbara is significant and extends beyond those officially registered but many are linked to mining activities, such as the construction and accommodation businesses. The regional economic profile is shaped not only by the number of operating businesses but also by their distribution across various sectors, employee count and formal registration status.
Under both terms of state agreements and under their own volition, the mining companies in the region also invest heavily in community development and infrastructure. This includes funding for education, health and community services, as well as the construction of housing, roads and other infrastructure. Generally, the positive economic sectoral performance of mining presents a significant opportunity for regional development in the Pilbara. It provides not only direct employment and revenue but also significant flow-on effects on other industries and investment in community development and infrastructure. This makes mining essential to the region’s economic growth and development.
Some of the principal mines and the companies that operate them in the Pilbara include:
The Hamersley Basin, owned by Rio Tinto, home to some of the world’s largest iron ore mines, including the Channar, Mount Tom Price and Paraburdoo mines.
The Yandicoogina mine, also owned by Rio Tinto, another significant iron ore mine in the Pilbara region, producing millions of tonnes of iron ore per year.
BHP’s Mount Whaleback mine, located in the town of Newman, one of the largest iron ore mines in the world, with reserves estimated at over 1 billion tonnes.
The Pilgangoora mine, owned by Pilbara Minerals, a significant lithium mine in the region producing high-quality spodumene concentrate for export to customers in Asia.
These mines are some of the largest iron ore and lithium producers in the world and are responsible for the majority of material mined in the Pilbara. The mining companies operating in the Pilbara also produce other minerals, such as gold and copper, but in smaller amounts compared to iron ore. Right after iron ore, gas and LNG are the second-largest sub-sector (see Chapter 3 for further information on the mining ecosystem).
Economic growth is strong, especially over the last decade
The Pilbara region of Western Australia is heavily dependent on the mining industry, particularly the production and export of iron ore. The income generated from mining in the Pilbara is closely correlated with the international prices of commodities, particularly iron ore.
The correlation between the international price of iron ore and the income generated from mining in the Pilbara can be quantified using econometric techniques. For example, a study by the Reserve Bank of Australia found that a 1% increase in the international price of iron ore leads to a 0.13% increase in the real GDP of Western Australia (RBA, 2016[22]). Conversely, a study by the Commonwealth Scientific and Industrial Research Organisation found that a 1% decrease in the international price of iron ore leads to a 0.09% decrease in the real GRP of Western Australia (CSIRO, 2015[23]). This suggests a strong positive correlation between the international price of iron ore and the economic activity in the Pilbara region.
This large share of mining activity has supported significant economic growth in the region. Figure 2.4 shows the economic growth rate of the Pilbara surpassing the Western Australian and Australian averages. By the LGAs of the Pilbara, those with a higher share of mining saw the highest rates of growth from 2008 to 2020. Comparing the growth rate of specialised regions to the OECD average, the specialised regions tend to marginally outperform the others.
Source: Australian Bureau of Statistics via REMPLAN; OECD (2023[24]), Gross Domestic Product (GDP) (indicator), https://doi.org/10.1787/dc2f7aec-en. (Accessed on 2 May 2023)
This economic growth must go hand in hand with efforts to equalise the inequality generated in the territory
The Pilbara region presents an unequal portrait of wealth distribution. The income values suggested by income data – 21.3% of residents earn between AUD 2 000 and AUD 2 999 per week, with an additional 17.5% earning AUD 3 000 or more – lack the big picture of the region. A closer examination of the data unveils contrasts in socio-economic conditions, both within and across communities.
In regions like Karratha and Port Hedland, the Socio-Economic Indexes for Areas (SEIFA) scores exceed 1,000. A high score indicates a relative absence of disadvantage overall. Yet, juxtaposed against this affluence, areas like Roebourne and eastern Wickham fare poorly, underscoring pockets of poverty in an otherwise prosperous region (Pilbara News, 2018[25]). A broader perspective further underscores these discrepancies. The Pilbara’s wealthiest residents are far more affluent than their counterparts in Western Australia as a whole. For instance, 21.3% of the Pilbara residents earn between AUD 2 000 and AUD 2 999 per week, and 17.5% earn AUD 3 000 or more, compared to 10.0% and 6.7% respectively, across Western Australia (Figure 2.5).
Yet, at the same time, the percentage of residents with no income in the Pilbara is nearly as high as that of Western Australia – 7.2% versus 9.3% – an indicator of the socio-economic gaps that persist even amid regional affluence. Data show that some areas, like Cowrie Court, Ridley Street and Warrier Street in Bulgaria, are among the most disadvantaged in Australia. On the other hand, towns like Dampier and Tom Price, linked to Rio Tinto, are in the top level for socio-economic advantage in the country.
Source: REMPLAN (2023[17]), REMPLAN Economy, https://app.remplan.com.au/?pt=EconomyProfile. (Accessed on 27 May, 2023)
The Pilbara mining industry bucks the trend with significant employment growth despite a nationwide decline in mining jobs
The trend of increasing employment in the mining industry in the Pilbara region of Western Australia is not necessarily reflective of a broader trend across the rest of Australia and OECD member countries. With regards to employment, the number of people employed in the mining industry in the Pilbara has increased from around 18 500 in 2011 to around 31 414 in 2022 (Australian Government, 2016[26]) and (REMPLAN, 2023[18]). This represents a 70% increase over the past decade.
This growth in employment in the mining industry in the Pilbara has been driven by a combination of factors, including increasing global demand for iron ore, the development of new mining projects and the expansion of existing mines. The mining companies operating in the Pilbara, such as BHP, Fortescue Metals Group and Rio Tinto, have invested heavily in expanding their operations in the region to meet growing demand.
In fact, the trend of increasing employment in the mining industry in the Pilbara region of Western Australia is not necessarily reflective of a broader trend across the rest of Australia. The mining industry in Australia as a whole has experienced a decline in employment in recent years (ABS, 2021[27]). The number of people employed in the mining industry in Australia decreased from around 212 000 in 2014 to around 164 000 in 2020, a decline of around 22%. This has been driven by a combination of factors, including a fall in commodity prices, the phase-out process of coal mines, a decline in investment in new mining projects and increased automation in some mining operations.
To put efforts into economic diversification beyond mining and to promote growth in agriculture, tourism, and other industries
The economy of the Pilbara is not solely dependent on mining. Other industries, such as agriculture, tourism and construction, also contribute at a lower scale to the region’s economic growth. Additionally, the Pilbara is a major centre of natural gas, which is an important source of energy for the region and the wider state. Furthermore, the Pilbara also has a diverse and growing population, with a range of businesses and services catering to residents and visitors. In recent years, the government and private sector have invested in infrastructure and development projects that aim to diversify the Pilbara’s economy and create new opportunities for growth.
Around 73% of the Pilbara’s GVA comes from the mining sector and this share within East Pilbara is a staggering 91%. When compared to neighbouring Western Australian regions, this degree of specialisation cannot be found (Figure 2.6). For example, the closest similarity is in the Goldfields-Esperance region, where over half of its GVA is derived through mining and, therefore, would be considered a specialised region;4 however, the gap between this and its next largest sector – manufacturing – is smaller than can be found throughout the Pilbara (Figure 2.7). In many regions, the dominant sector contributed significantly more to the local economy than the second-largest industry. In other regions, specialisations were spread across both the wider industry and manufacturing sectors. Notably, the mining sector has seen an increase in its share of the economy over time, with statistics from 2010/11 showing it accounted for around 60% (RDA, 2012[28]).
Source: Australian Bureau of Statistics June 2020 GVA via REMPLAN; REMPLAN (REMPLAN, 2023[18]), Economy, Jobs and Business Insights - Pilbara, https://app.remplan.com.au/pilbararegion/economy/trends/business-counts-staff?state=Kp9MIN!Xr3pFPxObU1GnJvuGlDMZHwtmhpkWIwSjhX9wsQhQSLHgSOf4zG.
Note: For Australian regions, the difference was determined using industry sectors from the Australian Bureau of Statistics for June 2020. For OECD benchmark countries, the difference was based on OECD SNA 2008 sectors using 2017 data
Source: Australian Bureau of Statistics June 2020 Gross State Product via REMPLAN; OECD (2022[16]), OECD Regional Statistics (database)
The economy is subject to volatility driven by low diversification levels
The Pilbara region’s economic growth is highly volatile. Whilst the GRP has on average grown at 17% per year from 2008 to 2020, this growth has been inconsistent. Between 2011 and 2012, the economy grew a noteworthy 128%, while the year after, the GRP contracted by 12%. Overall, economic growth in the Pilbara comes at the price of extreme volatility.
Part of this volatility is due to international prices of minerals, mostly iron as this is what is mainly mined in the Pilbara, and diversification of the economy is low. Mapping the Pilbara GRP growth alongside world iron ore prices shows a substantial correlation (Figure 2.8). This reflects the dependence of these global trends on regional income. In addition, the University of Queensland (University of Queensland, 2019[29]) refers to iron ore as more volatile than other commodities, as prices, in part due to transactions between buyers and sellers, are more likely to be conducted in closed-door negotiations and, therefore, lack transparency.
Note: GRP data are in June 2018 AUSD prices. Yearly iron ore prices are calculated as an average of monthly prices in USD.
Source: Australian Bureau of Statistics via REMPLAN, Index Mundi monthly iron ore. (IndexMundi, 2022[30]) (Accessed on March 15th, 2022)
The Pilbara region’s economic growth is highly volatile, with a coefficient of variation of 40% in the GRP growth rate between 2008 and 2020, which is about 4 times higher than the average degree of volatility for the rest of the country. Within the region, Karratha (25%) and Port Hedland (36%) rank below the Pilbara average, with Ashburton (51%) and East Pilbara (50%) above the Pilbara average level of coefficient deviation. The whole TL2 Western Australia region performs markedly lower at 13% (Figure 2.9).
Note: GRP coefficient of variation calculated with USD per capita, constant prices, constant purchasing price parity (PPP) and base year 2015.
Source: GRP per capita calculations based on OECD (2022[16]), OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.
There is also a high dependency on a single external market. The vast majority (96%) of what is mined is exported (Figure 2.10). Imports to the region are also concentrated in the mining sector, with only some relating to manufacturing and construction. The small internal markets of the Pilbara with limited diversification increase the vulnerability from openness. The largest consumer of iron ore is China and economic analysis shows Chinese economic growth and policy decisions to be the most influential factor determining international iron ore prices (Wårell, 2018[31]). In 2019, of the USD 124 billion exported, China imported 66.8%, mainly to make steel, which is then used in infrastructure and construction projects (OEC, 2019[32]). Thus, the Pilbara is severely exposed to this demand from China (Figure 2.11), which is influenced by broader global economic growth (demand for steel for construction, etc.).
In addition, mining iron ore is the least value-adding element of this supply chain. In 2019, iron ore sold for USD 92 per tonne, pig iron for USD 309, steel pipes and tubes for USD 960 and structural grade steel for USD 3 000 (Steelnet, 2021[33]). These statistics point to theoretical avenues for diversification by exploring downstream processing – discussed in more detail in later chapters through the concept of smart specialisation (BCEC, 2019[34]).
Note: Regional imports data represent the value (USD) of goods and services imported into the defined region by businesses/organisations in each of the industry sectors. Another way of defining imports is as an outflow of money from the region, i.e. a local business outsourcing accountancy services to a firm in another region, which results in an outflow of money; thus, they are importing services. No distinction is made between domestic and international imports.
Source: ABS 2017/2018 National Input Output Tables. (ABS, 2019[35]) (Accessed on 20 November, 2022)
Note: The dotted black box in Panel B represents the system/internal economy.
Source: Liu, J. et al. (2017[36]), “Implications from substance flow analysis, supply chain and supplier’ risk evaluation in iron and steel industry in Mainland China”, https://doi.org/10.1016/j.resourpol.2017.01.002.
High productivity can be attributed to trade openness and high capital intensity of production
The OECD finds a clear positive correlation between a region’s openness to trade and regional labour productivity growth (OECD, 2020[37]). The Pilbara is no different in this regard, with higher levels of productivity (AUD 714 395 per worker in 2016) than the Western Australian (AUD 234 126) and Australian (AUD 133 830) averages. In fact, the productivity gap has been increasing between Western Australian regions and the rest of Australia as, since 2000, productivity has increased by 2.5% per year, substantially more than the least productive region of Tasmania at 1% per year (OECD, 2020[37]). In fact, Western Australia and, in turn, the Pilbara, are far ahead compared to other OECD regions (Figure 2.12). Even within the comparators of specialised regions, only a fifth had productivity levels greater or equal to Western Australia.
Note: Values are standardised to USD in 2015 prices.
Source: TL2 regional productivity based on OECD (2022[16]), OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.
When breaking down productivity by sector, workers in the Pilbara region are found to be as productive as those in other parts of Western Australia and Australia. However, there are important differences between the sectors (Figure 2.13). The mining sector in the Pilbara is found to be more productive than other sectors and the manufacturing sector’s productivity in the Pilbara is two and a half times higher than the Australian average. In contrast, service productivity is higher in other parts of Western Australia and Australia. Therefore, the overall higher productivity in the Pilbara region is largely driven by the mining sector, which is more productive than other sectors and may also contribute to the productivity of other nearby industries by sharing income sources.
Mining is often considered productive because it is classically capital-intensive, requiring fewer workers per output. In comparison, across the OECD, many firms at the productivity frontier rely more intensively on highly skilled workers, particularly in the service sector, such as the financial service industry (OECD, 2019[38]).
The value-added per worker in the mining sector is markedly higher than in the other sectors. Regardless of the Pilbara or Western Australia as a region, mining-related industrial activities such as iron ore (AUD 2 556/worker), coal (AUD 1 063/worker) or non-ferrous metal ore (AUD 468/worker) experience a relative larger productivity than activities with a greater presence in other parts of Australia not as specialised as the Pilbara, such as financial and insurance services (AUD 584/worker), wholesale trade (AUD 216/worker) or manufacturing (AUD 205/worker) (Figure 2.14). Yet, within the mining sector, not all activities are as productive as others. For instance, the productivity of the financial service or real estate sector is greater than that of non-metallic mining. This points to the possibility of better allocation of resources from a productivity standpoint (Economy Watch, 2021[39]).
Source: Australian Bureau of Statistics 2016 Census via REMPLAN (REMPLAN, 2023[17]) (Accessed on 5 June 2022)
There are indications of large productivity gaps within the business demography
In June 2019, three multinational mining firms accounted for almost two-thirds of employment in the Pilbara region. Firms with 250 or more employees are defined as large and those below as SMEs. Within the Pilbara, 98% of all firms were SMEs (OECD average of 99%) (OECD, 2021[40]). However, the total number of firms in the region is much lower per km² or per capita than across the OECD or Australia. square kilometrekm² and per number of inhabitants er population than across the OECD or even acrossthan across the OECD or Australia. Compared to the economic comparator regions, the Pilbara has 3 times fewer firms per 1 000 population (34 across the Pilbara, even below the lowest proportion in the benchmark Northern Hungary at 44 firms).
At the same time, the rate of business churn is much higher than in other OECD regions. Calculated as the proportion of entry plus exits to total firms in any given year, OECD economic comparator regions tend to have a lower churn rate5 than the OECD average. In contrast, almost a third of businesses in the Pilbara have changed each year. This may be partially driven by country-specific factors, as the churn across Australia is higher than the OECD average. On the one hand, the rate is an indicator of “creative destruction” and business dynamism (OECD, 2017[41]); on the other, it may reflect difficulties for viable incumbents to expand (OECD, 2009[42]). Given, on average, the largest churn is seen amongst SMEs (Calvino, Criscuolo and Verlhac, 2020[43]) and in several longstanding mining companies, it could be inferred that large employers dominate the region and have a small and underdeveloped small and medium business sector. This is backed by having a much smaller share of non-employing businesses, typically associated with start-ups and entrepreneurial activities.
Across Australia, 9.1% of mining firms are SMEs but this varies significantly by sector. Within the agricultural sector, this is 80.2%; half of all construction firms are SMEs and over 40% of all accommodation and food businesses (Snabel et al., 2012[44]). Following this trend, it is not the Pilbara mining industry that houses the regional SMEs. Business demographics in the region (Table 2.7) show an increase in the number of businesses in the more productive sectors outlined above, such as research, science, accommodation and food services. This points to the growing tourism sector over the last few years, partly driven by the Pilbara Development Commission leveraging the acclaimed Karijini National Park and a number of coastal attractions. The substantive degree of agriculture, predominantly in the form of cattle stations, seems to have seen a slight decline in terms of the number of businesses in the last few years.
SMEs are primary sources of innovation across OECD regions (OECD, 2019[45]). However, Australia’s SMEs rank in the bottom five OECD countries for practical intelligence, innovation, and adaptability (OECD, 2021[40]). Assistance for SMEs is therefore required and needs to go beyond access to public financial support (as Australia already ranks far above the OECD average on this indicator).
Another measure of economic innovation is the number of patent applications, typically registered by larger, more established companies. In 2015, firms in the Pilbara applied for 18 of the 202 applications by Western Australia (i.e. around 10% or 1 patent for every 117 businesses in the region). In comparison, OECD economic comparator regions saw 1 patent for 349 firms on average and 1 in 294 across all OECD regions. Alternatively, compared to specific mining regions, the Pilbara saw 7 patents per million inhabitants in 2018 versus 51. One reason for higher-than-average statistics may relate to pressures within the mining sector to find cost-effective solutions (Bain & Company, 2015[46]). Looking across the 55 Australian regions, the Pilbara ranks low or very low on other innovation measures, such as the presence of research organisations or employment in R&D (Australian Government Initiative, 2014[47]) (Tables 2.6 and 2.7).
A large proportion of those who work in the Pilbara do not reside there
Before delving into the characteristics of the employed population, it is vital to note an exceptional feature of the Pilbara: the sheer volume of migration. In the 2021 census, a quarter of the Pilbara’s population were living elsewhere in Australia and almost 7 p.p. above were elsewhere in Australia ten years prior in 2011. This adds up to a population turnover in 2001-16 of a staggering 68.5%. This shows that population growth trends are correlated to the region’s GRP over time; in other words, the population moved to work. This is not a feature identified across wider Australia. The average population growth over the last 10 years has been 1%. This is greater than the Western Australia Outback average of 0.5% and slight growth is in line with population trends in OECD mining regions (0.56%) but far below the OECD regional average (6%). Figure 2.15 shows the usual residence for many is the suburbs of Perth, with other usual residences around other major Australian cities, less than half state their usual residence as the Pilbara. A typical roster ranges from several weeks to several months.
Given many move to the region to work in mining or related sectors, it is not surprising that the employment rate is exceptionally high. With a participation rate of 90% and an unemployment rate of 2.5%, the region is among one of the most employed in the world, like several regions of Iceland and Switzerland. The unemployment rate of the wider Western Australia Outback region (7% in 2019) is lower than the average of OECD regions (7.8%) and the benchmark of mining regions (8.2%).
Note: Place of usual residence: this is the place where a person usually lives. It may or may not be the place where the person was counted on Census Night.
Source: 2021 Australian Census via (REMPLAN, 2022[9]) (Accessed on 14 of January of 2023).
The phenomenon known as FIFO, where the working population in the Pilbara region resides outside it, poses significant challenges to the region’s economy and society (around 50% of the population). While the younger and older populations tend to reside and work in the Pilbara, the working-age population 25 to 65 years old often chooses to live outside the region. For instance, between the ages of 35 and 55, it reaches its peak, with over 2 000 workers of the region living outside of it (Figure 2.16). This situation has important implications for labour stability and social cohesion in the region.
The increase in daily commuting and long distances travelled by the working population also has environmental and transportation consequences, with increased traffic and pollution on the roads. Additionally, this phenomenon can reduce community participation and social cohesion, as workers residing outside the region are not as involved in the activities and life of the local community. Therefore, it is important that policies and measures be adopted to address these challenges and promote sustainable and balanced development in the Pilbara region.
Source: ABS 2021 Census Place of Work Employment via (REMPLAN, 2022[9]) (Accessed on 14 of January of 2023).
Over the past decade, the Pilbara region has seen a significant rise in the working-age population working but do not live there. This phenomenon is particularly noticeable among certain age groups, according to Table 2.8. For instance, the 30-34- and 35–39-year-old age groups have seen striking increases in workers who do not reside in the region. The number of such workers in the 30-34 age bracket rose by 2 201% from 2011 to 2021, while the 35-39 age group witnessed an astounding 35 000% increase. Similarly, there is a marked increase of workers who do not reside in the region among the 15-19, 20-24, 25-29, 60-64 and 65-69 age groups.
This change in demographics also points to a trend of FIFO workers. The FIFO percentage for the 30-34 and 35-39 age groups is 50%, indicating a significant proportion of these workers are temporary. This phenomenon is even more prominent for the 20-24, 25-29, 40-44, 45-49, 50-54 and 55-59 age groups, with FIFO percentages ranging from 51% to 59% (Table 2.8).
The average worker is a young male employed in mining for long hours and high pay
Figure 2.17 looks at the age composition of the region’s workforce. Many studies show that the highest probability of migrating is between the ages of 20 and 30 years old (Zaiceva, 2014[48]), which matches the workforce – mainly the mining workforce – age structure in the Pilbara. Compared across Australia, whilst those employed in the mining sector are generally younger anyway, they are particularly younger in the Pilbara.
Note: The employment data in this report represent the number of people employed by businesses/organisations in each of the industry sectors in the defined regions. In this report, the employment data are place of work data and represent the total number of employees without any conversions to full-time equivalence.
M: Mining sector compared to all other sectors.
Source: ABS 2016 Census of Population and Housing (Scaled) via REMPLAN (REMPLAN, 2022[9]) (Accessed on 14 of January of 2023).
Workers in the Pilbara are concentrated in specific occupations. Each sector needs an array of workers, from labourers to salespeople, managers to clerics, and, as such, workers are typically distributed relatively evenly across these jobs. Figure 2.18 shows that this is not the case in the Pilbara and, instead, employment is clustered into technicians and trades jobs and machinery operator and driver occupations. Across Australia, a third of the population are employed in managerial or professional occupations, whereas in the Pilbara, this is less than a fifth (with a quarter around Europe). This may be driven by a workforce that, on average, has a lower level of education than the Western Australian or Australian average.6
However, perhaps as a reflection of the much longer hours worked, the rate per hour is also higher to compensate for conditions – FIFO, long hours, remoteness, and climate – and to attract skilled workers in a competitive environment. Thus, the average income is much higher than in other Australian regions, with 28% earning more than AUD 3 000 a month (Figure 2.18, Panel C). Most notably, these figures hold for employment in the Pilbara that is outside of the mining sector, indicating a more systematic trend.
Source: Australian Census 2021 via (REMPLAN, 2022[9]) (Accessed on 30th March, 2023)
However, the Pilbara’s gender disparity in the workforce hinders sustainable development in the region
In the Pilbara, those employed in mining are typically male and, with such a dominance of the sector, this has skewed the labour market of the region to be male-heavy. The wider Western Australia Outback has the highest male-to-female ratio amongst OECD mining regions. In comparison, across the OECD labour market, the ratio is skewed towards women (79 working men for every 100 working women). Mining regions tend to face lower participation of women in the workforce given the masculinisation of the sector (Abrahamsson et al., 2014[49]). In 2020, around 50 000 males worked in the Pilbara comparatively around 15 000 females, 51% and 26% in mining respectively.
While there is limited data on skills and qualifications at the regional level across the mining sector, the majority of mining workers (40%) in the country are mainly Technicians and Trades workers, and Machinery Operators and Drivers with both cases having low female participation. Women in the mining industry with tertiary qualifications appear more in the non-STEM fields of education (Weldegiorgis, 2022[50]).
The mining sector has historically faced challenges to overcome gender-based discrimination with sexual harassment issues that have likely contributed to the lack of female participation in the mining sector. For example, following a series of public reports of sexual assault in the FIFO mining industry, the Western Australian Government released a report in 2022 titled Enough is Enough into sexual harassment and sexual violence amongst FIFO workers (Western Australian Government, 2022[51]). An independent review by Rio Tinto found 28.2% of women had experienced sexual harassment at the workplace (Elizabeth, Broderick & Co, 2022[52]).
Technological progress in mining activities may provide opportunities to increase labour possibilities for women by creating an improved work environment and higher qualification demands that will enable more women to work in the industry. However, such changes may have significant implications on the dynamics of demand for digitally skilled labour, disproportionally impacting women.
A gender-balanced labour market can promote sustainable regional economic development in a number of ways. In the case of the Pilbara specifically, a more balanced workforce would ensure that the skills and perspectives of both men and women are represented in the mining and resource extraction industries, which are a major driver of the regional economy. This can lead to more efficient and effective decision-making, as well as increased innovation and productivity. Additionally, increasing the participation of women in the workforce can have a positive impact on the local economy by increasing consumer spending and boosting demand for goods and services. This can lead to the creation of new jobs and businesses, which can further support sustainable economic growth, critical for fostering a sense of community and social cohesion, and important for the overall well-being of the population and long-term sustainability of the region. All these factors can lead to sustainable economic development and a better future for all members of the community.
The quality of life of citizens in Western Australia, including the Pilbara, varies depending on the dimension we observe (Figure 2.19). While the region performs better than the OECD TL3 benchmark in areas such as long life, youth share of population or education, other aspects such as innovation, renewable energy generation or the share of females in the workforce continue to underperform. The following section will explore in more detail some dimensions that make up the citizen’s experience of life in the Pilbara.
Source: Data obtained from the ‘’Toolkit to measure well-being in mining regions’’ (OECD, 2023[1])
Higher wages for some do not equal higher standards of living for everyone
Living in the Pilbara region of Western Australia can be expensive, as shown in the Department of Primary Industries and Regional Development annual cost of living report (WA Government, 2019[53]). The Pilbara region had the highest Regional Price Index (RPI) compared to other regions in the state. Rural areas often face higher costs of service delivery due to lower population density, which means there are no economies of scale and service users, and providers must travel longer distances (OECD, 2020[54]). Even though the regions of Gascoyne and Goldfields-Esperance have a lower population density than the Pilbara, they are geographically closer to metropolitan areas. Surprisingly, despite being more remote and further away from urban centres, the RPI in the Kimberley region is lower than that of the Pilbara (Table 2.9). However, upon closer inspection, it is evident that this difference is driven by significantly higher costs for housing and healthcare in the Pilbara.
The high cost of living in the Pilbara is a particular challenge for the local population, especially considering the FIFO culture prevalent in the mining industry. FIFO workers earn higher wages, which means they have greater purchasing power for the same goods and services as residents. Moreover, FIFO workers spend out of pocket relatively less than the permanent population, as their employer typically provides their food and accommodation. Instead, they tend to spend their income in their hometowns or elsewhere outside the region. Conversely, local resident mining workers have more spending power in the region and are likely to make a greater contribution to the local economy.
The Western Australia Outback stands out in terms of job supply but needs to improve economic diversification and inclusion of women in the labour market
As mentioned before, the Western Australia Outback performs relatively well in economic terms, especially where mining operations take place. Employment growth has also faced a positive trend in the last decade (4.7% between 2007 and 2019), far above the growth in the benchmark of mining regions (2.6%) and just slightly below the OECD average (5.7%).
However, the region has scope for improvement in terms of diversification, share of female labour force (40% women to 60% men) and innovation activity. The region has a lower diversification level than other OECD regions and even than other mining regions such as those in the OECD benchmark. Diversification here is measured based on employment distribution across economic sectors. Innovation levels in the Pilbara are far lower than in the benchmark of OECD mining regions. While patents do not depict the entire innovation activity in rural regions, comparing patent levels among comparable rural regions can reveal action for improvement.
Demographically, the Pilbara differs from the wider Western Australia Outback
The Western Australia Outback stands out for its greater share of young people (21.7% of children between 0-14 years old in the population) than the OECD regional average (17%) and the OECD mining region benchmark (17.8%). However, this share is much lower across the Pilbara (16.8% for 0-19 year-olds in 2018). Young people are an important asset for the future of the local economy. Investing in opportunities to open up economic activities locally to this young population can help diverse economic activities. Educational attainment across the Western Australia Outback is higher than across Australia and the benchmark of OECD regions, but the Pilbara sees a significant share of the population with below upper secondary level of education.
The Western Australia Outback benefits from a lower death rate (4.6% in 2015) than the average of OECD mining regions (9.7%) and even the regional average in Australia. It might be linked to greater access to healthcare in the region in comparison to other mining regions. In comparison, as mentioned above, healthcare provision in the Pilbara is amongst the lowest in Australia.
The Western Australia Outback generates higher GHG emission than the benchmark of mining regions and faces a decrease in green land cover
The Western Australia Outback is among the top ten regions with highest GHG emissions per capita within the 50 OECD mining regions benchmark. The industry sector produces most of the emissions in the region (31% of the total GHG emissions in 2019), ranking 7th within the OECD mining regions benchmark (OECD, 2023[1]). The large LNG projects in the Pilbara, which require substantial amounts of energy to operate and to liquefy gas and export it, along with dispersed mining operations that are mainly powered by fossil fuels, represent a significant source of the industrial GHG emissions in the region (The Australia Institute, 2023[56]). The second-largest source of emissions is the transport sector (28%), which is partly explained by long commuting times of freight and people through fuel-powered vehicles due to the geographical extension of the region, the low population density and marginal use of public transport for passengers. The agriculture sector (21%) is the third-largest source of emissions (OECD, 2023[1]).
Moreover, the Western Australia Outback produces higher GHG emissions from electricity generation (496 tonnes of carbon dioxide [CO2] equivalent per gigawatt hour) than the OECD benchmark of 50 mining regions (331) and almost twice above the OECD regional average (252) (Figure 2.20). Electricity generation in the region comes mainly from fossil fuels (more than 90%), with still a far lower contribution from renewable sources (mainly solar and wind) than the average of OECD mining regions (44% in 2019). Overall, the region generates higher GHG emissions across the power, transport, and industry sectors (77,320 kilograms of CO2 equivalent per capita in 2018) than in other OECD mining regions (47,605), and far above the OECD regional average (14,796) (Figure 2.21).
Source: OECD (2023[1]), “Toolkit to measure well-being in mining regions”, https://doi.org/10.1787/5a740fe0-en.
Source: OECD (2023[1]), “Toolkit to measure well-being in mining regions”, https://doi.org/10.1787/5a740fe0-en.
Housing is a key challenge in the region
The lack of available homes drives the high prices of housing. Residential vacancies in 2021 were below 1% and many of those who work in the mining companies have their accommodation provided for them by their companies (REIWA, 2022[57]). Figure 2.22 shows that 45% of dwellings are company or publicly owned. The rate of home ownership is much lower than in other parts of Western Australia, meaning rental prices in the private rental market for lower-remunerated occupations, are fast becoming unaffordable and may even be driving people away. Data compiled by realestate.com.au show the Karratha suburb of Millars Well experienced the most rental growth in the year up to January 2021, surging by almost 40% to a median weekly rent of AUD 600 (realestate.com.au, 2021[58])
Incentives for long-term investment are mixed as pricing is highly cyclical and, once mining slows down, rental levels will drop, as will house prices. In addition, construction costs are very high as a consequence of the high cost of labour and materials that need to be supplied from far-away Perth. Home building approvals have also declined over the last few years, with just over 30 new residential buildings approved between 2019 and 2020 compared to over 300 five years prior (ABS, 2020[59]).
Across the OECD, in rural areas on average, housing costs are lower as land prices are cheaper per square metre than in larger metropolitan cities. In fact, this lower cost of living is often a driver in attracting residents to the area (OECD, 2020[54]). Considering the most scarcely populated OECD regions, the average number of rooms per capita is lower in remotely populated areas than the OECD average, as is the share of household disposable income spent on housing. However, Australian regions across the board have lower costs and a greater number of rooms per inhabitant than the OECD. This makes the findings in the Pilbara even starker (Table 2.10).
Chapter 4 will further explore the challenges to improve access to affordable housing in the Pilbara, which include: i) the volatility of the economy that leads to uncertainties in supply and demand of housing; ii) low levels of owner occupancy and high construction costs; and iii) high property prices and finance valuation delta shortages of affordable housing in the Pilbara. Chapter 4 will also make some recommendations to improve the housing market in the region.
Health and childcare can be bottlenecks for citizens’ well-being
The average age of the region residents is 34, leading to an elderly dependency ratio of 3.3% (23.9% in Australia and 28% across the OECD). In theory, this means less pressure on healthcare services. However, poor environmental and household conditions (e.g., either work- or lifestyle-related) meant that 1 in 4 adults (24%) reported an injury requiring treatment from a medical professional. In addition, during 2007-11, 56% of deaths of Pilbara residents under 75 years of age could have been avoided through better use of primary prevention and treatment interventions and potentially preventable hospitalisations (hospitalisations that could have been avoided with disease intervention plans and various methods of preventative care); this is much higher than the state average (WAPHA, 2016[60]). Combining the high demand of services and remoteness of the region provides a reason for high costs. This is a challenge for many OECD remote regions. Recent OECD work on public service delivery costs in rural areas states:
“Lower density means higher transportation costs, loss of economies of scope and economies of scale, and greater difficulty in attracting and retaining professionals (e.g., health care professionals). At the same time, new technological advances have opened the door to providing quality services in new forms and substituting physical forms of delivery with virtual ones. Many governments increasingly pursue integrated and flexible approaches to the provision of services in rural areas as a way of maintaining quality and access. Integration involves the coordination of public services across a range of sectors –from health to education and eldercare/continuing support services.” Service delivery in rural areas - OECD
Investing in education is a key driver for social and economic development
As noted within the labour force segment, educational outcomes for the population are lower than the Australian average. This has improved over time, with final year of school or equivalent school completion shares increasing from 31% in 2006 to 42% in 2016; the Western Australian average is over half. This represents the greatest change, while the numbers attending tertiary education – including technical institutions – have increased but not substantially so (1 841 to 1 876 students from 2011 to 2016). As with many other OECD remote regions, costs associated with distance are key drivers of lower educational attendance. Lower levels of education do not directly translate to higher levels of youth unemployment (Table 2.11).
Whilst physical connectivity infrastructure is competitive, digital connectivity is limited
Infrastructure in the Pilbara region prominently features major ports, airports, roads, and towns (Figure 2.23). Given that the workforce operates predominantly on a FIFO (Fly-In Fly-Out) basis, the need for such connectivity is evident. Rail lines dedicated to transporting iron ore are abundant. However, these lines don't support passenger trains, and each rail network is owned and operated privately by individual companies for their iron ore logistics. With the vast distances separating towns, coupled with over 2,200 residents in 2016 expressing the lack of access to a motor vehicle, it presents travel challenges for many. Essentially, while there's robust infrastructure for goods transport, the same doesn't hold for the dynamism of people.
Source: Australian Government Initiative (2014[47]), The Pilbara Resources & Beyond Regional Development Australia-Pilbara.
The importance of technology, especially Internet infrastructure, cannot be overstated, especially for low-density regions. Enhanced Internet connectivity can mitigate several challenges, like isolation, heightened transportation costs, the expense of service delivery and the distance to markets. Earlier data suggested that in the 2016 census, only 42% of the Pilbara residents could access the Internet from their homes, a more thorough examination that filters out "not applicable" responses (which likely represent FIFO workers in non-private dwellings) shows a higher figure. When focusing on valid responses alone, an average of 86.7% of residents across the four Pilbara LGAs reported Internet access from their dwellings. All in all, Australia broadly ranks 12th among OECD regions on the digital urban-rural divide (Figure 2.24) (OECD, 2023[61]). Internet accessibility is a common challenge in Pilbara and the rest of rural-remote regions of Australia and the OECD.
Note: According to the OECD Regional Typology, a region is classified as rural if more than half of the population lives in local units with a population density below 150 inhabitants per km² and urban if less than 15% live in such low-density local units, with some variation for Brazil, Chile, Japan, Korea and the United States. See (Brezzi, Dijkstra and Ruiz, 2011[62]).
Source: OECD Going Digital Toolkit based on OECD (OECD, 2023[61]), ICT Access and Usage by Households and Individuals (database), http://oe.cd/hhind and ITU (2022[63]), World Telecommunication/ICT Indicators Database, https://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx.
A closer analysis of the Internet accessibility across the Pilbara region highlights distinct variations among its subregions. In Karratha, 66.0% of its 25,262 residents accessed the Internet from their homes, and when focusing solely on valid responses, this figure rises to 89.4%. On the other hand, East Pilbara shows a different scenario. Out of its 17,933 residents, 22.0% accessed the Internet from their dwellings, and among valid responses, this percentage increases to 74.2%. The other subregions, Ashburton, and Port Hedland, exhibit connectivity rates of 21.2% and 59.4% respectively from their total populations, with the rates based on valid responses at 87.5% and 87.7%. This data emphasizes the importance of differentiating between total counts and valid responses to accurately assess digital connectivity. For a detailed breakdown, the subsequent table provides a deeper insight into the data across these subregions.
Some regional rankings mask vast inter-regional inequality, particularly between First Nations and non-First Nations peoples
The Pilbara region in Western Australia has a significant First Nations population, with 13% of the region’s population identifying as First Nations, compared to just 3% across wider Western Australia (Figure 2.25). Additionally, almost half (45%) of the total Aboriginal and Torres Strait Islander population in wider Western Australia are under the age of 20, indicating a young age structure within the population (WAPHA, 2016[60]) (Figure 2.25).
However, using the region of East Pilbara as an example, these communities face significant disparities when it comes to income levels. The median personal income for First Nations individuals aged 15 and over is reported to be AUD 311 per week (in East Pilbara). This is significantly less compared to the median personal income of AUD 481 in wider Western Australia and AUD 540 nationwide. Thus, the First Nations community in East Pilbara earns substantially lower personal incomes, reflecting a significant income inequality in the region.
This disparity extends to family income as well. First Nations families in East Pilbara have a median weekly income of AUD 897, compared to AUD 1 469 for families in broader Western Australia and AUD 1 527 across Australia. Despite this, it is worth noting that the median household income for the First Nations community in East Pilbara slightly exceeds the state and national medians. Specifically, First Nations households in East Pilbara report a median income of AUD 1 529, compared to AUD 1 480 in Western Australia and QUD 1 507 nationally. This discrepancy could be a result of larger household sizes among the First Nations population.
Source: Australian Census 2021 via (REMPLAN, 2022[9]) (Accessed on 14 May 2022)
The OECD report Linking Indigenous Communities with Regional Development (OECD, 2019[65]) reveals that First Nations populations are more likely to live in rural areas though recent trends show that they are becoming increasingly urbanised in countries such as Mexico and, to some degree, in Canada. However, the growth rate of First Nations peoples in these more rural areas is expected to decline over the next ten years. First Nations populations are more likely to experience poorer socio-economic outcomes, with the lowest employment rate of First Nations peoples found in Australia, while New Zealand has the highest rates (OECD, 2019[65]).
Despite land use agreements between mining companies and traditional owners, whereby trusts benefitting traditional owners receive significant royalties, poverty in many dimensions still persists among First Nations communities in the region. This is reflected in significant disparities across differences in health, education and income compared to non-First Nations populations, with estimations suggesting that non-Aboriginal people live around ten years longer than Aboriginal people in the Pilbara (ABS, 2017[66]). Figure 2.26 displays these inequalities by comparing five different dimensions that impact the quality of life of First Nations people in the Pilbara region, specifically focusing on education, employment, income, housing and health. Each dimension is presented as a percentage of First Nations individuals experiencing disadvantage compared to non-First Nations people in the same region, based on data from the 2016 Census and the Australian Bureau of Statistics.
Source: Australian Census 2021 via (REMPLAN, 2022[9]) (Accessed on 14 February, 2022)
Employment and education
First Nations people in the Pilbara experience poorer socio-economic outcomes, with the lowest employment rate compared to other First Nations populations in OECD countries. In the Pilbara region at the start of the century, 60% of First Nations people were unemployed, with double the number of women compared to men in this category (Taylor and Scambary, 2005[67]). Those employed were often in lower occupational classes and earned, on average, AUD 250 less per week than non-First Nations workers, equivalent to approximately USD 10 000 per year in 2020 (NRHA, 2020[68]). By comparison, the income gap in Mexico was USD 11 600 (2016) and USD 4 000 in New Zealand (2013) (Olive, 1997[69]).
Educational outcomes are a significant factor in these disparities, as individuals with at least an upper secondary degree are more likely to participate in the formal economy, earn higher incomes and enjoy better health. However, the rate of upper secondary education attainment in the Pilbara is only 25%, which is lower than the national average of 33%.
Access to services
Access to essential services such as healthcare, transportation and telecommunications can be challenging for remote First Nations communities in the Pilbara. The Australian government has committed to improving service delivery to First Nations communities but there is still significant room for improvement in terms of accessibility and quality. Access to healthcare, in particular, is a concern for First Nations communities in the Pilbara. The National Aboriginal and Torres Strait Islander Social Survey (NATSISS) of 2014-15 found that First Nations Australians were more likely to report having a long-term health condition and the preventable hospitalisation rate for First Nations residents in the Pilbara was more than five times greater than that of non-First Nations residents between 2006 and 2010. Additionally, First Nations communities in the Pilbara are more likely to experience violence, with physical abuse rates significantly higher than non-First Nations communities.
Moreover, the 2014-15 NATSISS (ABS, 2017[66]) identified that 60% of Aboriginal and Torres Strait Islander people in Western Australia report long-term health conditions. In the Pilbara, between 2006 and 2010, Aboriginal residents had a preventable hospitalisation rate more than five times greater than non-Aboriginal residents. Additionally, physical abuse rates are considerable, with 27% of First Nations peoples in Western Australia experiencing or being threatened with physical violence in the previous 12 months, the highest rates across Australia; half of those incidents occurred within the family (ABS, 2017[66]). In comparison, the life expectancy gap is smallest in Mexico, where the average gap is less than two years.
Housing constraints
One-third of Western Australian First Nations peoples had experienced homelessness in 2015, with many living in overcrowded dwellings. While frequently an urban issue, housing constraints are relevant in the Pilbara despite being a relatively remote area. For example, in Canada, urban First Nations peoples are eight times more likely to end up being homeless than non-First Nations people living in cities (The Homeless Hub, 2019[70]). In 2015, one-third of Western Australian First Nations people had experienced homelessness despite it being frequently perceived as an urban issue. Housing affordability is also an issue, with many First Nations peoples struggling to afford rental costs in the Pilbara. The lack of affordable housing has resulted in many being forced to relocate to urban centres in search of better housing conditions, which can have significant cultural impacts. The housing crisis in the Pilbara has been attributed to a lack of investment in social housing by both the government and private sector.
Cultural diversity
First Nations people in the Pilbara are not a homogenous group, with differences in culture and socio-economic outcomes. The region is home to First Nations people working in a variety of employment niches, including mining, pastoralism, private business and community organisations. However, some feel excluded from such opportunities. One of the main challenges is preserving and celebrating the region’s First Nations cultural heritage, which is under threat due to factors such as urbanisation and the impact of the modern economy, particularly the mining industry (ANTAR, 2022[71]). Efforts to preserve First Nations cultures and traditions can contribute to social cohesion and reconciliation.
To better understand the effects of mining on regional development and the impact of the green and digital transition, the OECD has built a benchmark of 50 OECD regions with a high specialisation in mining activity relative to their respective countries and 13 indicators to measure well-being standards across these regions. The selection of 50 OECD regions uses the following criteria:
First, identifying the small regions in the OECD country (Territorial Level 3). The OECD has more than 2 400 TL3 regions in its 38 member countries. The distribution of these regions by country is a mix of statistical and administrative boundaries that are at a geographically comparable scale and consistent with national classifications.
Second, defining regional mining specialisation based on employment location quotients (LQ). The degree of regional specialisation in mining is obtained by comparing the share of mining employment in the region with the share of mining employment in the country. A value of LQ above one implies that the region is more specialised than its respective country. The employment specialisation in mining, based on LQ values, is ranked from highest to lowest.
Third, 50 of these regions are selected taking into account their degree of specialisation in mining, the country’s weight in overall mining employment across the OECD, the type of minerals involved and the geographical diversity.
The 13 indicators of well-being, adapted to the characteristics of OECD regions specialised in mining activities, draw on the OECD’s well-being framework and are structured around the following three core dimensions of well-being:
Economy: Economic diversification, unemployment, employment growth and innovation.
Community/social: Gender balance, population growth, share of young population, death rate and education level.
Environment: Change of green land cover, anomalies in soil water content and GHG emissions from the mining supply chain and electricity generation.
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Notes
← 1. The Fly-In Fly-Out (FIFO) calculation for the Pilbara region was determined by comparing the number of individuals working in Pilbara to the number residing there. The resulting figure represents the difference attributed to workers who commute to the region for work but do not live there. This methodology was applied for both the years 2011 and 2021, and the subsequent increase over the decade was calculated.
← 2. The share of First Nations in the Pilbara has been obtained by combining the 2021 Census data from East and West Pilbara and based on the place of usual residence, serves as the most updated and closest approximation to identify the number of First Nations individuals in the region.
← 3. 2016-18 average GVA. Cleaned for data anomalies.
← 4. Where 40% or more of a region is 2016-18 average GVA is concentrated in one OECD industry group. See Box 2.1 for further information on the construction of benchmarks.
← 5. Churn rate is the sum of birth and death rates of enterprises, provides a measure of how frequently new firms are created and existing enterprises close down.
At the same time, the rate of business churn is much higher than in other OECD regions. Calculated at as the proportion of entry plus exits to total firms in any given year, OECD economic comparator regions tend to have a lower churn rate than the OECD average.
← 6. 25% of workers in the Pilbara hold a diploma or a degree compared to 39% in Western Australia and 42% in Australia.