In its annual Mining in Australia report released yesterday, economic forecaster BIS Shrapnel says it expects mining production to grow 41% over the next five years.

The report predicts mining activity as a share of gross domestic product to rise from 18.7% to 19.8%.

BIS Shrapnel’s infrastructure and mining senior manager Adrian Hart said Australia would become an even more mining-focused economy from here.

“With respect to the mining boom, it’s probably fair to say that this is not the beginning of the end, but the end of the beginning,” Hart said.

“Over the next five years, the strong boost from mining production, led by LNG and iron ore, will more than offset the economic negatives from falling mining investment, which will flow through to construction and manufacturing.”

The report says mining production has risen 8.8% in 2012-2013 and the outlook for growth remains strong with annual average growth of 7.1% forecast to 2017-2018.

However, the forecast predicts mining investment to fall 20%, creating a divisive future for a number of mining sectors, with suppliers and contractors being hit while production booms.

“High cost/high service contractors to the mining sector are currently facing the brunt of the adjustment,” Hart said.

“While this is not expected to be a permanent shift, contractors need to navigate region by region, and sector by sector, to identify opportunities opening up in operations, maintenance and facilities management to offset an aggregate decline in construction and development work.”

The growth in mining employment is not expected to keep pace with the expansion in production as miners put a considerable focus on cost reduction.

Overall employment is expected to fall 12% over the next five years despite operational mining employment expected to rise 11%, representing a sharp drop in mining-related construction employment.

“Miners will continue to be squeezed by lower commodity prices and a high Australian dollar over the next few years,” Hart added.

“As such, they are going to extraordinary lengths to cut back on the high costs-low productivity culture that characterised the construction phase of the boom.

“We expect that mining operations employment will rise only 11% over the next five years, mainly in oil and gas and iron ore, whereas mining construction employment will slump 40%.

BIS Shrapnel said its commodity price index fell 26% from the June 2011 peak, however, it believes an improving, but patchy, global economy will drive a re-acceleration in industrial production over the next few years supporting a modest increase in commodity prices before they flatten due to increasing supply.