You might be forgiven for thinking that the residential property market is in a slump. Sales are slow, prices have fallen and buyers are worried about the potential for further interest rate rise over the next few months.

That’s all true - for most areas of Australia. But the boom is continuing in Western Australia where sales are brisk and prices are soaring. There is a boom-town mentality in the West and dinner party conversations inevitably include property prices and how they compare with the stagnating eastern states.

Why the difference? In a word: China. The boom in resource rich Western Australia shows just how closely we are now linked to the Asian super state.

The share market too is reaping the rewards of our China link. BHP-Billiton and Rio Tinto have become the multi-billion dollar darlings of the stock market. Profits and share prices are soaring.

It is no exaggeration to say that it is the resources boom, fuelled by an apparently insatiable China, that has saved Australia from the slump that would have occurred when the property market cooled.

Once again Australia is being viewed internationally as a resource rich quarry.

The results are being felt not only amongst stock market investors but also by the millions of workers who have money in superannuation and unit trusts.

We are becoming richer, faster, than ever before. The obvious question is: How long can it go on?

The optimists see China growing in real terms at eight or nine per cent a year for the next two decades or so. If this occurs China will surpass the European Union and Japan in terms of economic clout and will start to rival the US. Some say it will be larger than the US within thirty years.

The Chinese too are becoming richer, although admittedly millions still live in poverty. According to some estimates the buying power of the Chinese middle class will exceed the spending power of all Europe in less than 15 years.

Some financial analysts say that this gives investors a once in a lifetime opportunity to reap the benefits of Chinese growth. Long-term investors would have heard all this before.

After World War II, Germany was the star performer economically and many experts were saying it would surpass the US with ten years or so. It has a different way of organising its economy and its contract style workforce arrangements were seen as a model for the rest of the developed world. Well, that was then. The economic miracle has stalled and Germany is now regarded as the sick man of Europe.

The Soviet Union in the early days was also seen as a model for economic growth and for a while it was impressive. But its centralised economy collapsed under the weight of its own inefficiencies.

Japan, with the close connection between business and government, was also seen as a new model for successful capitalism. But it foundered in 1990 when the share market collapsed and has had trouble ever since.

But China does have some advantages. It has a hard working and ambitious workforce that seems almost inexhaustible. It has deregulated its workforce so the old centralised directives are gone. It has also welcomed foreign investors and allowed local companies to compete freely. It is now reaping the rewards of easy access to the latest technological advances. This is something that the Soviet Union, Germany or Japan never did to any great extent.

China is also placing great emphasis on education and rediscovering its old traditions and respect for scholars and learning.

But there are those who urge caution. Rapid economic growth is having its problems. There is still extreme poverty in many sections of the country, environmental damage is some areas is extreme, there is an enormous amount of corruption and other economic crimes, and there is the possibility of social strife from the millions who are still missing out.

Chinese leaders say they are trying to address these problems but some actions, such as pollution controls, may have the effect of slowing the economy down.
In addition, early gains are easy when you can simply lift the technology from someone else.

But China will eventually reach the technological frontier. Progress beyond this point can be slow and uncertain.

A further problem lies in China’s one child policy that will cause China to age prematurely. This is likely to be costly in terms of output and the social services required to meet the needs of the elderly.

Of course these problems are in the future and there may be solutions. In the meantime, Australia can reap the rewards of having the resources that China needs to grow. In the future, India, Brazil and a revitalised Russia will also be moving into the economic mainstream.

Anything can happen.

David Tomlinson is a freelance finance journalist based in the Northern Rivers of NSW.