Rhian said: "It’s true that the minerals boom is a boon for our economy, but these positive trends were evident through the 1990s, before it happened. And they will continue once the boom ends..."

The minerals boom has provided a short-term boon for our economy, but it may have also exacerbated our economy's long-term structural imbalances e.g. narrow export base, overreliance on foreign capital and the resultant large current account deficit. Demand for Australian minerals has allowed the private to continue borrowing in order to keep spending more than it earns. Such a trend is only sustainable as long as international investors and creditors believe it is.

Considering the massive blow-out in Australia's net foreign liabilities, most would agree that it's only a matter of time before we face another balance of payments crisis. As Australia lacks an alternate export base, our economic fortunes are almost completely tied to global commodity prices. A substantial downturn in commodity prices would lead foreign investors to take their funds out of the Australian economy. We would suffer a credit crunch and the currency would fall, thus leading to further sales of Australian assets in a down spiral toward debt-induced recession.

Simply put, Australia's high vunerability to external shocks means that our economy is more akin to an oil-rich sheikdom than a modern industrialised nation.

Arjay
I’d agree that quality of life is not measured only in hours worked and dollars earned, but your original post made claims about trends in these indicators that are clearly wrong. Nor does shifting ground to the manufacturing sector help your case. Average earnings growth in manufacturing has actually been faster than the all-industries average data I quoted, with full time adult earnings rising by 56% and total earnings up by 57% in the past 10 years. This is no surprise to those of us who understand that competition is driving productivity gains, and refutes those who argue that competition forces us into a race to the bottom in wages.

No, we can’t and shouldn’t compete with third world wages, but we don’t have to. The whole point of the gains from trade is to concentrate on the things we’re RELATIVELY good at and exchange the product for things others are relatively good at. A good analogy I read recently is this – Tiger Woods is a trained and certified tax accountant, but it makes no sense for him to complete his own tax return. He’s better off practicing his golf and paying someone else to do his paperwork.

Oligarch
The issues you raise have more substance, and there is evidence from overseas of a “resource curse” effect of resource endowment crowding out other industries. Our rising exchange rate may be evidence of that. I suspect our reliance on foreign capital has more to do with low domestic savings that industry structure, however, and on balance our reliance on primary industries for exports is less now than it was 20 years ago, despite its recent increase, because of the declining importance of agricultural exports and rise in services exports.

Overall, Australia’s real per capita economic growth in the past few years compares favourably with other developed economies. This suggests to me that the booms make the busts worthwhile, but I accept there are costs and risks as well as benefits in our current economic structure.

Rhian,we have a balance of payments deficit now approaching $400 billion and the US has a deficit in the trillions.We are are relying on others to produce goods and services that we have no way of servicing the cost or debt.

If you try to send manufactured goods to China there is an import duty of 110%.We have import duties of just 5%.This is not a level playing field.No other country has a no tarrif barrier policy on primary/manufacturing products other than Australia.Why are we the sacrificial lambs?

There is no method in our madness and the pursuit of free trade with this present ideology will bring us all asunder.

True wealth is in your educated population,so why do we in the land of OZ do the opposite to that of Ireland in not investing in affordable education?We have infinately more resources from the minerals boom,yet have no resources for infrastructure or to effectively educate our youth.

Our present preoccupation with an expectant milaise of cheap products will prove to be serious folly.