NAGGING CURIOSITY ABOUT where the rivers originated lured Australia’s great European explorers beyond the Great Dividing Range. Equipped with boats, drays and provisions they followed the rivers as far as they could, hoping against hope that the source would be a vast inland sea watering a continent as well endowed as North America. In their wake the land filled with sheep and cattle.

The grand vision of an inland sea defined Charles Sturt’s public life and culminated in his final journey of exploration from Adelaide in 1844, pursuing, some say, seagulls that flocked north every autumn and returned in good condition each spring. It was an arduous trek; Sturt and his party were forced to camp just beyond a ‘hog-backed hill’ for months, waiting for rain. When the journey resumed they established, at great personal cost, that the inland sea was a tantalising mirage in country that seemed to be made up of unforgiving ranges, flatlands and deserts.

It was another three decades before settlers inspired by the Californian and Victorian gold rushes applied for leases and pegged out the site – near Broken Hill – hoping to find tin. They were disappointed when assays revealed lead and silver instead, but they did not have to wait long before the ‘haphazard’ and at times ‘dangerously amateurish’ enterprise brought them extraordinary wealth. What is now the world’s largest resources company, BHP Billiton, was conceived in that hot, unforgiving land – not far from where it continues to make fortunes ripping precious minerals from the ground.

As Peter Thompson and Robert Macklin document in The Big Fella (Heinemann, 2009), the pastoralists who created the Australian narrative were battling drought and rabbits, unimpressed by the foreign prospectors chipping away in the sun. They readily traded their interests in the venture and passed up access to fortunes that would outlive their properties.

THIS SCEPTICAL VIEW entered the national mindset: mining was for gamblers – pastoralists were the colonies’ true, hard-working aristocracy. In a gold rush fortunes may be made quickly, but they are also easily lost. During the 1850s gold accounted for a third of GDP and Victoria’s population jumped from 77,000 to 540,000 in two years, but wages doubled, wool exports fell and manufacturing stalled. The colony enjoyed extraordinary wealth, but it didn’t last and once the boom was over there was little to show for it – apart from grand buildings in Melbourne, Ballarat and Bendigo.

Economic historians agree that there have been four mining booms since – each, so far, marked by an equally spectacular crash.

The late-nineteenth-century boom made Broken Hill a national icon, enabled Charters Towers to run its own stock exchange and saw Western Australia’s population almost quadruple to 180,000. It ended with a whimper, a victim of a global depression, rising costs, falling profits, capital drought and impoverished investors who learned, at their cost, that mining was for gamblers. In response city-based industries regained the ascendancy, aided by a protective buffer of tariff walls.

Through the first part of the twentieth century Australia muddled along with a mix of protected manufacturing and agricultural industries; even in the good years of the 1950s growth rarely pipped 2 per cent. The possibility that Australia could be a country that built its wealth on extractive industries, like the oil-rich Middle East, was not a serious part of the national conversation. Mining may have been the bedrock of the biggest companies, but it was remote and detached from the reality of most people’s increasingly urbanised lives.

It took until the late 1960s before there was another mining boom of any consequence. Discoveries of coal, iron ore, bauxite and oil provided a focus for the new capital-intensive extractive industries; Japan was hungry for materials and conveniently close; export prices, employment and inflation soared.

True to the dominant image that boom, like the ones that preceded it, is best remembered for the gambling it inspired. A company named for the Greek god of the sea, Poseidon, reported discovering nickel in Western Australia. It did not take long for Poseidon to become derogatory shorthand for the boom that collapsed under the weight of its own hype. Speculators listed companies on the stock exchanges, rich with promise but little more. Mining shares reached an all-time high in January 1970, and then crashed – taking the savings of countless small investors with them. Poseidon produced little nickel; its sharp practice resulted in new corporate regulations, and reinforced the sense that mining is a gamble.

In the early 1980s global demand for coal, oil and gas produced another brief spike – ships lined up off the New South Wales coast, new coal loaders were commissioned and built, railway links were extended. According to the Reserve Bank Deputy Governor, Ric Battellino, this induced ‘a sense of euphoria about Australia’s future’. It too was short-lived. Yet the recession that followed provided the impetus to float the dollar, deregulate the economy, reduce tariffs, encourage global competitiveness and the services sector – the pre-conditions essential for the current boom, one that promises to break the mould.

SOMETHING EXTRAORDINARY IS again going on beyond the Great Divide, something that will profoundly change Australia in ways we have scarcely begun to imagine, something that demands fresh thinking and courageous policy innovation.

There are not enough clichés to describe the transformation of the outback into the economic heart of the nation. The scale of the new industrial mining is incomprehensible to those of us who spend our lives in congested, lush and well-resourced towns and cities on the coast. Yet last year mining and energy accounted for nearly 20 per cent of GDP, surpassing the export revenue from manufacturing for the first time, with 40 per cent of the total value.

Australia is the great pit enabling the industrialisation of the developing world – especially China. In the parts of the country where few of us ever venture there is an overabundance of the ingredients needed to build and power the cities of the future, not impossibly far beneath the surface.

Beyond the Great Divide the dusty outback, once divided between vast pastoral stations, is now dotted with mining operations of extraordinary scale and scope: Olympic Dam in South Australia is the largest underground mine in the world (and set to grow); there are open-cut pits so big they can be seen from space and change the local climate, piles of bauxite and iron ore that reach for the skies and would dwarf city towers if there were any nearby.

This is not simply the upswing of another boom. There may be a bust lurking, but mining is no longer the pursuit of gamblers and shysters, although it still has more than its fair share of colourful characters. It has been professionalised and internationalised; miners now talk about social responsibility, Indigenous rights and improving the lot of people in developing countries.

The descriptions all too easily wash over us: for a people with an obsessive attachment to big, things are about to get a lot bigger. Already it is known that Australia has the world’s largest reserves of bauxite, uranium, nickel, and the second largest reserves of gold, and the third-largest supply of iron ore.

That is just the start. The country is also home to the sixth-largest supply of coal, the seventh-largest reserve of manganese, and even oil and gas comes in twentieth on the world league tables. It is not likely to run out soon; at current rates, copper is projected to last for at least three decades, oil and gas for half a century, iron ore a century, bauxite, coal and platinum much, much longer.

Australians may like to think of the country as a knowledge-intensive services economy – but at its core it is a giant mine, one that is about to become much bigger. As the chief executive of BHP Billiton, Marius Kloppers, regularly says, ‘I doubt the average Australian understands how his prosperity is linked to resources.’ Yet one way or another the new boom will force a fundamental transformation of the Australian economy. This is not something we can afford to ignore, or leave to luck, or the mining companies, investment bankers and economists to resolve – there is more at stake.

WHEN DONALD HORNE sat down in his Sydney backyard after lunch on a summer afternoon to write The Lucky Country, his concern that ‘Australia is a lucky country run mainly by second-rate people who share its luck’ was widely shared, but rarely expressed. Penguin’s British bosses did not want to publish it; they did not think it was the sort of book Australians would want to read – a view they quickly corrected when it sold 18,000 copies in nine days late in 1964, and 260,000 within a few years.

Horne was concerned (among other things) that the easygoing nature he admired in his country folk fostered a lack of curiosity and ambition, and would result in a continuing decline in the standard of living. He had not anticipated the new boom, although in updated editions of the classic text he touched on the possibility that bauxite, iron ore, oil and coal might play a part in the country’s economic future. He was pessimistic about the capacity for innovation and about foreign ownership, and no more of a seer than any other commentator or explorer.

The Australia Horne ironically described as lucky in the early 1960s is radically different today – some of the good things have been lost, but there is a sense of urgency, opportunity and global engagement. His throwaway phrase has now entered the national vernacular, and is increasingly used literally, even a tourism slogan, ‘Say g’day to the lucky country’.

It was not just luck that Australia managed to navigate the recent global financial crisis better than those countries with which we like to be compared; it was not just luck that China’s industrialisation requires what Australia can provide, or that government policies and corporate capacity and ambition combined to make it possible to satisfy this demand. These outcomes are a product of tough decisions over many years. The Australia Horne described lacked the intellectual, political, regulatory and capital requirements to engage on a boom of this nature with confidence, rather than a gambler’s bluff.

But this does not mean that everything is sorted. Mining is by nature a finite activity – one day the mines will run out, and we need to be prepared. Although mining jobs pay almost twice as much as those in manufacturing, they don’t raise the standard of living of those not directly involved.

Australia now has the opportunity to reinvent itself on the back of this extraordinary boom, digging into Sturt’s mirage to produce untold wealth. This sort of opportunity does not happen often. Few countries are so fortunate – but with resources now accounting for a fifth of GDP and rising, that is the prospect on offer, if we are bold enough to grab it. The discovery of North Sea oil and the development of economically efficient means of extracting it, forty years ago, gave Britain a boost as its Empire died, but Norway – now the world’s third-largest oil exporter – remade itself and created a sovereign wealth fund today worth $491 billion that will bankroll its future.

In calling for change Horne noted, ‘The time might come when broad views of change that now seem impractical will seem sensible and to the point.’ Once again we need to think carefully and boldly about the sort of place we want Australia to be, how the benefits of the buried treasure can be shared now and preserved for future generations, how we can develop diverse downstream industries that increase wealth and opportunity for all, how we can extract social as well as economic benefit from the bounty beyond the Great Divide.