The sectorial impact of commodity price shocks in Australia

•Mining industry profits substantially increase in response to commodity price shocks.•Construction output increases substantially in response to a bulk commodity shocks.•Parts of the manufacturing industry benefit from commodity shocks.•However, the financial and insurance sector is found to be relatively unaffected.

This study reports that commodity price shocks predominantly affect the mining, construction and manufacturing industries in Australia. However, the financial and insurance sectors are found to be relatively unaffected. Mining industry profits and nominal output substantially increase in response to commodity price shocks. Construction output is also found to increase significantly, especially in response to a bulk commodity shock, as a result of increased demand for resource related construction. Increased demand for construction has a positive spillover effect to the parts of the manufacturing industry that supply the construction sector with intermediate inputs, such as the non-metallic mineral sub-industry. In contrast, other manufacturing sub-industries with only tenuous links to the resources sector such as textiles, clothing and other manufacturing, are relatively unresponsive to commodity price shocks.