Between 2005 and 2012, Australia began a mining boom that took over our economy. By 2012, mining investment generated half of the economy's growth. But this year the boom is expected to hit its peak, then reverse. And then the force that pushed us up will start pushing us down.
What will drive Australia's growth then? For economists, it is the question facing the country. No one knows the answer.
The official view is all will be well. The Reserve Bank and Treasury argue that while mining investment shot up by the lift, it will come down by the stairs. And by then several influences - low interest rates, hopefully a lower dollar, an improving global economy and rising resource exports - will allow other industries to take over the baton.
But history tells us a different story: it says mining booms end in busts. And some of Australia's most eminent economists fear history will be repeated.
Ross Garnaut warns Australia is facing a sharp downturn, which could end up as a decade of economic weakness such as the one we experienced from 1974 to 1983.
"We are likely now to face major adjustments to incomes and living standards," says the Melbourne University economist, former prime ministerial adviser and ambassador to China. "If we do not manage the adjustments well, we will face a long period of economic stagnation and uncomfortably high unemployment."
Former Reserve Bank board member Bob Gregory, of the Australian National University, warns the economy risks falling off a cliff as minerals prices and future mining investment fall back to normal levels. He and Peter Sheehan, of Victoria University, and former head of the Victorian Treasury, argue monetary policy cannot do much. They propose a big federal-state program of infrastructure investment to become the new engine of growth.
What's the problem, when Treasury and the Reserve Bank have told us for years that booming demand for our minerals from China, India and other developing countries will result in mineral prices and mining investment remaining high for a decade, if not decades?
Some of their assumptions - an insatiable Chinese demand for coal, a long global shortage of iron ore - now appear fragile. As we've learnt, mining booms rarely end gently.
Post-war Australia had three mining booms before this one. The first was from 1965 to 1971, the era when shares in nickel producer Poseidon shot up in five months from 80¢ to $280, before going up in smoke. Mining investment's share of the economy swelled sixfold, from 0.36 per cent of GDP in 1963-64 to 2.23 per cent in 1970-71, before crumbling rapidly.
A new boom doubled mining investment's share of output to 2 per cent in 1982-83, when it was cut off abruptly by the country going into recession. The mid '90s was a quieter affair, but mining investment climbed to 1.8 per cent of GDP before it, too, sank like a stone.
None of these booms ended gently. Each ended with mining falling off a cliff, and within two years it was more or less back to where it started.
Nor was there an orderly baton change to other industries. Each boom ended with non-mining business investment collapsing together.
This time we stand on a far bigger cliff. By the December quarter, mining investment had risen to 6.6 per cent of GDP, up from 1.1 per cent in 2004. If this boom ends in a bust, we will have an awfully long way to fall. The question is: will this time be different? And if so, why?
Treasury and the Reserve argue this time is different. They point out that global growth is now dominated by China, India and the developing world. Those two giants are in a resource-intensive phase, and Australia is a relatively close, low-cost supplier, especially of iron ore, coal and liquefied natural gas (LNG).
Our investment pipeline is now dominated by a few big LNG projects, which are locked in and will take years to complete.
The two entities foresee mining investment gliding down gently. And as it goes, in theory, the high dollar, too, should fall, restoring the competitiveness it stole from our manufacturers, farmers, tourism operators and universities.
Declining mining investment will also be offset by rising mineral exports. The Bureau of Resources and Energy Economics predicts resource exports will grow by 28 per cent in volume in the next five years, and - despite falling prices for iron ore, thermal coal, gold and copper - mining export revenues will swell 48 per cent.
Finally, the Reserve believes interest rate cuts are stimulating investment and activity elsewhere. It points to the jump in consumer confidence and what it sees as green shoots of growth in jobs, housing and retailing. While it warns the transition may be bumpy, it expects growth to stay about 2.5 per cent until late 2014, then rise to 3 per cent.
There are many unknowns. Almost every bit of that analysis is challenged by others of equal eminence. Usually you'd put your money on Australia muddling through; after all, it's 23 years since we fell flat on our face. But at the top of this once-in-a-century mining boom, the future is unusually precarious.
In the mid 2000s, Garnaut, Saul Eslake and Chris Richardson challenged the official view the budget was strong enough to afford big tax cuts. They argued the boom in company tax revenues was temporary, and we should bank it. They were clearly right then. And all of them have concerns now.
Garnaut is the most pessimistic. An expert on China and mining, he argues China is moving away from resource-intensive growth. In 2012, thermal power generation grew just 0.6 per cent as it turned to hydro-electricity, wind and nuclear power. Its demand for iron ore imports has slowed, and with rising competition from other suppliers, he says, some of our key exports could face "periods of historically low prices despite the continuation of reasonably strong aggregate demand".
In Sydney last month, Garnaut also forecast the US would start exporting LNG at prices that undercut the assumptions on which Australia's LNG boom rests. He predicted all this would lead to some projects being postponed or abandoned and some existing mines closing while many others would experience periods when they were barely profitable. Mining will slump, taking Australia with it.
"We will have to adjust to much lower incomes," he warned. "We will have to adjust to rapidly rising rather than falling prices for tradeable goods and services. We will have to adjust to much lower relative costs. Downward adjustments on the scale we will face are immensely difficult."
Richardson, director of Deloitte Access Economics, is less gloomy. As a long-time consultant to the mining industry, he says the future could hinge on decisions by boards later this year on whether or not to go ahead with the next wave of big projects, collectively worth $126 billion.
"Our Investment Monitor suggests the peak of the boom might be nine months away," he says. "My view is that we will have an extended peak. Mining investment will stay at a really high level for some time before it turns. If none of those $126 billion plans go ahead, then we have a bigger problem."
He sees a bigger risk that minerals prices could fall off a cliff. "We are extremely sensitive to China, and China has to adjust [its growth model]. The hardest thing is to predict the timing." He does not share the Reserve's optimism for non-mining business investment, which in 2012 hit almost a 60-year low as a share of GDP. He expects Australia to slow in 2014, but says activity will then grow as the Reserve holds interest rates low. "We will have two years of low rates, and that will be positive for the retail and housing sectors."
Eslake, chief economist of Merrill Lynch in Australia, sees the real risks as coming in 2015 and 2016, when the present wave of LNG projects are completed. By then, the US will have decided whether it will export its gas or keep it all to itself.
"The cliff will happen eventually," he says. "This poses a downside risk to growth when it occurs."
Eslake, as is Richardson, is wary of putting an optimistic spin on recent data. He notes that non-mining business investment plans are lower than a year ago. The strength of the exchange rate remains the central problem, as it forces business to focus on lifting productivity, which, with growth low, will lift unemployment, which will restrain confidence, demand and growth.
There is no consensus. But the risks highlighted by Garnaut, Gregory and Sheehan are ones decision makers will ignore at their peril.
Garnaut's paper is at rossgarnaut.com.au; the Sheehan/Gregory paper is at cbe.anu.edu.au