Australia has been adjusting to substantial economic structure changes linked to historically strong terms of trade, the boom in the mining sector and a very high real exchange rate. All these developments are linked to rapid growth in Asia, especially China, and the resulting demand for raw materials. They have had far-reaching effects on the economy through sharp income growth, strains on productive capacity that could affect macroeconomic stability and substantial structural changes, both sectorally and regionally, due to the geographical concentration of mining activities. Since the beginning of the recent mining boom, the challenges of the so-called multispeed economy have taken centre stage in the Australian economic debate.

The country's adjustment to the mining boom has so far produced favourable results, even as it has imposed significant strains, in particular in the non-mining tradable sectors. The development of Asia offers challenges and opportunities beyond terms-of-trade developments, as the gradual emergence of a huge middle class with potentially large demand to be satisfied will expand markets and open new ones. To take full advantage of these ongoing changes, a smooth reallocation of resources in the economy should be encouraged. The medium-term fiscal strategy should take better account of the likely increase in the economy's volatility and its greater dependence to the fluctuations of the terms of trade. Tax reforms have a useful role to play in facilitating the ongoing structural adjustments, while it is essential to maintain a flexible labour market.