It’s almost fifty years since Donald Horne published his book ‘the Lucky Country’ in 1964. For most Australians the phrase has become a reminder of Australia’s natural beauty, its isolation from wars and the country’s substantial wealth as well. But most don’t realise the phrase, and the title of Horne’s book, came from the opening sentence from the book’s last chapter, which reads

“Australia is a lucky country, run by second-rate people who share its luck”:

The country’s economic growth remains strong and unemployment low, but much of its recent performance has relied on an unprecedented resource boom prompted by surging Chinese demand. In 2002 the mining sector employed 80,000 Australians. Ten years later it employs almost 300,000.

It is difficult to see how Australia’s economic growth over the past few decades would be close to what it is now without the boom. But all booms end and Australia is avoiding asking tough questions about the sustainability of its economic settings. The current boom is beginning to sputter already: flagging resource prices, deferred projects are mounting, and new supply is coming online around the world.

Government, which is now about 35 per cent of national income in Australia, has become too large, primarily as a result of spiralling and unsustainable health and education spending. But rather than make the case for smaller government, our politicians continue to advocate yet more increases in welfare.

The public service has grown as a fraction of the labour force and the volume of new commonwealth legislation has grown exponentially, up from a few hundred pages a year in the 1950s to 7160 pages of legislation last year, undermining trust and entrepreneurial activity.

Australia also hasn’t had a serious debate about the economics of the financial services industry. In Australia as much as Europe or the United States, banks have grown fat on the back of implicit guarantees provided by taxpayers.

We avoided these problems because Australia’s house prices remain high and unemployment low, which are contingent in turn on Australia’s resource boom.

Finally, Australia should embark on another great wave of immigration, akin to those in the late 19^thcentury and post World War II era. Australia’s population is not sufficiently large to enjoy the economies of scale or level of competition businesses in the United States or Europe are subjected to, making costs higher in Australia.

Yet its growth rate has fallen from above 2 per cent in 2008 to 1.4 per cent in recent years.

Australia will only be the ‘clever country’ and not just the ‘lucky country’ when it begins to consider these three deeper structural flaws.

Adam Creighton is economics correspondent for The Australian newspaper.