Tough reforms could reap riches from satisfying demands of Asia

Australia is underestimating its opportunity to transform the mining boom into decades of sustained prosperity by supplying the mining, energy and food demands of China and the rest of emerging Asia.

But the nation also is yet to understand the policy changes required to facilitate the unprecedented investment in new capacity, concludes a report commissioned by ANZ Bank from consulting firm Port Jackson Partners.

The report provides one of the clearest frameworks yet for understanding the two-speed economy squeeze on sectors such as manufacturing from the mining boom’s high dollar.

It firmly rejects deliberately slowing down the mining boom fast lane. And it suggests that a “new era of economic reform” is needed to maximise the resource boom opportunities and to ease the pressures on the slow-lane industries.

But these policy changes have to be generated by opportunity rather than by crisis as they were in the 1980s. “The leadership in this economy is struggling to capture that vision,” ANZ chief economist Warren Hogan told The Australian yesterday.

“The good news,” says the Port Jackson Partners report, “is that the prize is so big, and the potential benefits so widespread, that Australia has every reason to embrace the opportunities.

“Unlike past episodes of growth, this will be long-lasting, dependent on technology and high-end skill sets and has the potential to deliver decades of economic prosperity.”

The report’s “base case” predicts a surge in Australian mining, energy and farm commodity exports from $210 billion to more than $480bn in today’s dollars over the next two decades, even allowing for significant falls in commodity prices.

“Market prices are signalling one of the great needs of our time — to provide the relatively poor of the world with the raw materials to move beyond subsistence and poverty,” says the report, pr