A good analysis, Jon.
I would just add my incredulity that no one seems to question the "inevitability" of the mining boom.
All sides of politics treat the demand for minerals etc. as something that must be met, and so grand programmes for enlarging the labour force by whatever means necessary are mounted, in order to keep up with demand and capitalise on the boom.
But how do we capitalise on it? In the form of growth; we grow our economy, which means we grow our population, demand for infrastructure and services etc., while all the while the excess accumulates nicely in the pockets of those who have invested in the enterprise.
There is no real qualitative difference made to the existing society; all this prosperity is converted into extending rather than improving or enriching, and certainly no consideration is given to imponderables such as sustainability, of the environment or of the burgeoning population, once the boom ends. New and lucrative enterprises will of course take over from the mining boom and in their turn continue to grow our economy (economic growth is material growth) ad infinitum.
I would posit the question: why must we respond with such alacrity to demand if our present population and needs can be satisfied while conserving and husbanding our resources for future prosperity, thereby also mitigating the negative economic effects of the boom Tons points to?
It's insane. Australia cannot sustain endless growth and extraction, and we have no qualitative need to expand. The raison d'etra is profit for a few rather than prosperity for all. An increasingly unwieldy western-style population means collapse is just a matter of time.
Just because we can satisfy demand and grow, doesn't mean we should.
The "logic" behind economic growth is so ingrained we don't question it. There is no logic!
We should be husbanding our resource (and manufacturing) wealth, and selling it with restraint in the global market, conservatively and as genuine "need" dictates, not in some knee-jerk reaction to "demand" (halloed be thy name!)--a rallying call for expansion and profit! Not prosperity, and certainly not maintainable!

Jon you have hit the nail right on the head.
One of the things that could be done is to subsidies some of the small businesses that are being moved offshore.
An example is the food processing plants in Country Victoria and Tasmania that are being closed down to “rationalize” them.
In effect the parent companies can get cheaper labour elsewhere and increase their profit.
It would be beneficial for Governments to provide finance for a buy out of the plants to be run by a workers Co-op.
And if necessary to provide a subsidy for their operation to help offset the cheaper labour costs of the overseas countries that they would be competing against. Not only would this give Australia food security but it would help to retain the skills needed to operate this type of industry.
The day will come when we will have to fall back onto our own resources and not have the skills to do it.

Yep,

Absolutely

See my piece

The Australian Dutch Disease and the Norwegian Cure

http://forum.onlineopinion.com.au/thread.asp?discussion=4053&page=0

Of course I think it more likely we'll see the second coming before the present crop of politicians take this seriously.

A prime example of the problem was a WA steel fabricating company CO interviewed on radio this morning.

He stated that they are having real difficulty competing with Asian engineering companies, for contracts for construction of sections of the gas plant now being developed at Dampier.

High wages, & material costs, brought about by the two stage economy are killing them.

Now I totally disagree with a super profits tax. Not only is it unfair, it would put even more money into the wrong hands, the government.

However there would be nothing wrong with a little clause in mining & processing permits requiring 60% of plant fabrication be done in Oz. This would still allow overseas competition, to prevent excessive pricing, & would encourage overseas heavy engineering companies to transfer some of their manufacturing to Oz.

What a change that would be. Could we call that on-shoring, as against Off-shoring?

Hasbeen, we can have long discussions about solutions.

But do you see any signs that Gillard, Abbott or Brown even recognise the problem?

In fact I would say the REAL problem is not the Dutch disease at all. It's the inability of the political class to understand there is a problem in the first place.

stevenlmeyer I believe you have hit it on the head right there, none of the political organizations identify with the problem. They are daily encouraged by the media to deliver bread and circuses, and deliver.

We have a PM who was considered a good candidate, because of her parliamentary performance. It remains her only strength.

Abbott is caught having to constantly respond and play an opposition, but can only act on the government's lead, he cannot set agendas, only the government can. He gets no attention if he is not playing an opposition role. Imagine how much attention he would get if he agreed with everything the government does .. zero, irrelevance.

When Abbott gets into power, will he be able to shed the media driven combative role he has adopted? Like many, I think it's our only hope to recover from the wrecking the ALP Coalition is doing.

I don't think the ALP can or will change, they have long ago set themselves on this course and unfortunately for us, it's heading for a brick wall with no way of changing direction. The only good thing that will come out of it is all the greenies and indies glommed onto them, will hit the wall at the same moment.