That Australia has seen an epic boom in mining over the last 10 years is undisputed. Notwithstanding the uncertainties hanging around in the world economy, big export earnings from mining look set to continue.

What have we got to show for it?

Unlike most in the world, it seems we are more prosperous. Incomes have risen for sure. But we’ve blown it on getting too “relaxed and comfortable”; on housing; and on “stuff”.

The proof? … We now have more net public and private debt than we had 10 years ago. Our savings and reserves are paltry. And most are deluded about what’s coming.

Let’s pick this apart with some simple data.

First, what does our boom look like?

Here’s a simple graph from the Government:

Things just rolled along through to 2004 when minerals and energy exports were about $70 billion. Eight years later they were nearly treble: about $200 billion. (2013 was down about 10% on price drops.) The difference? In a word, China.

“In 2001 China was already the world’s largest producer of steel and accounted for around 20 per cent of world steel production. Since 2001, China’s annual crude steel production rate has increased … 370 per cent, which is more than the rest of the world combined. In fact, 82 per cent of additional steel production in 2012, relative to 2001, is attributable to China.” … [BREE September 2013]

China now produces (and consumes) nearly half of all the world’s steel. It’s biggest imported source of steel raw materials is Australia. Australia is now the biggest exporter of iron ore by far: only Brazil is a (receding) rival. Australia is even more dominant as world’s biggest exporter of metallurgical coal for steel making: more than half world trade.

Our mining boom has been driven by China’s boom. If we look at the big 6 mining and drilling exports: iron ore, coking and steaming coal, oil and gas, and gold, then about $90 billion went to China in 2012/13. Clearly, Australia’s fortunes as a commodity exporter are inextricably tried to China. (So it would be smart to be nice to them, Julie Bishop!)

Exports of this same group of 6 commodities has brought revenue of about $1 trillion over the last 10 years.

Big numbers aren’t they?

So big that we need to understand them in some context …

We all know that Saudi Arabia is the biggest oil exporter. In the same ten years we looked at above, their oil exports were probably about $1.8 trillion.

Norway, is the world’s eighth biggest oil exporter. It’s oil exports over the same 10 years were about $450 billion.

Why pick these two? Well, they book-end and give context to Australia’s commodity export performance nicely, and they have the world’s two largest sovereign wealth funds. National piggy banks, if you like!

After notoriously enriching themselves for years, when oil prices started to rise and stay up, the Saudi elites started to put away some wealth for the future. The Saudi sovereign wealth fund is by now approaching $700 billion.

But it is not the biggest. That belongs to Norway.

Norway didn’t miss

Canada is another country with vast natural endowment. But, they also have no sovereign wealth fund to speak of. Curious about this position, the Canadian Globe and Mail has the the Norway story:

When oil was discovered in the Norwegian continental shelf in 1969, Norway was very aware of the finite nature of petroleum, and didn’t waste any time legislating policies to manage the new-found resource in a way that would give Norwegians long-term wealth, benefit their entire society and make them competitive beyond just a commodities exporter.

“Norway got the basics right quite early on,” says John Calvert, a political science professor at Simon Fraser University. “They understood what this was about and they put in place public policy that they have benefited so much from.”

This is in contrast to Canada’s free-market approach, he contends, where our government is discouraged from long-term public planning, in favour of allowing the market to determine the pace and scope of development.

(… and, of course, it’s government needs to win the next election … just like in Australia.)

So by having the completely different attitude identified above, Norway now has a sovereign wealth fund of more than $800 billion.

Somehow the Norwegians have manufactured this huge fund for a population of 5 million (Australia, 23 milllion) from GDP of about $500 billion a year (Australia, $1,600 billion) and oil related (natural resource) exports running at about $450 billion over the last 10 years (Australia, $1,000 billion)

The Norwegians got this right because of their attitude to the once only ever opportunity to sell resources. 

Australia missed.

Private and short term political interest won the day. Greed and power.

Sure we have the Future Fund. A paltry $90 billion set aside to fund the otherwise unfunded superannuation obligations to Commonwealth public servants.

And, thankfully, we have $1,750 billion in superannuation funds. But those have contributed significantly to the bloating of property prices and other financial assets. And they will be needed pretty fully to fund the post work life of that rapidly growing share of the population (like me).

For goodness sake, even Singapore, with no natural resources (even a good share of their fresh water comes from Malaysia); a similar population to Norway; and GDP less than $300 billion, has two sovereign wealth funds that between them have more than $450 billion.

What have we been thinking?