Doom and gloom in the reporting of commodity prices in past weeks is creating a very false impression of what’s happening in the Australian economy. Take, for example, this side-clutching headline in Australian Mining last week — “Mining boom is over: Ferguson”.

Resources Minister Martin Ferguson did not say “the boom is over”, but there’s nothing like a good headline to drum up interest in what he did say — merely that “premium” prices for our mineral commodities were over.

There is disconnect between the “end of the boom” story and reality on the ground — namely, that we’re going to keep digging that ground up for decades to come.

Note, for example, a report in today’s Australian that says: “BHP is expected to log a 2011-12 net profit of $US16.6 billion, down from last year’s record $US24 billion and a previous UBS expectation of $US17.97 billion.”

The same article notes: “Rio Tinto and BHP Billiton are set to report healthy quarterly production figures today and tomorrow, including in their high-margin iron ore businesses, but this is unlikely to buoy shareholders who have been hit hard by falling commodities prices and an uncertain outlook.”

Investors thought the “super-profits” would go on for years, but are now recalibrating their target prices for mining shares based on merely “good” profits.

As Western Australia Planning Minister Brendon Grylls sagely told me last year: “The mining companies aren’t investing for $300 per tonne prices, they’re investing for $100 per tonne.” Mining is shifting from being a bonanza to merely a good business to be in.

Meanwhile, a world away in Canberra, federal politics is a less attractive business to be in — one wonders when Treasurer Wayne Swan will realise that he’d be better off quitting politics and putting on a Kimberley hard-hat for more than just photo-opportunities.

That’s right Mr Treasurer. Get a job. Swap the smoke and mirrors of federal budget for diesel fumes and rearview mirrors of a giant dump truck.

Swan can’t solve the resource sector’s labour shortage single-handed (though with all the federal Labor MPs expected to lose their seats at the 2013 election he could make up quite a FIFO team), but at least he’d avoid the embarrassment of standing up on budget day 2013 to explain, again, where all the revenue expected to flow from the mining tax has gone.

The tax, designed to capture revenue from super-profits in iron ore and coal, dropped a billion dollars in the last budget estimates revision, and next year will almost certainly drop further — it’s currently projected to net $13.4 billion over four years. When that estimate is revised down again, surely Swan would be happier to be on a plane headed for Karratha, headphones in ears, bourbon and Coke in hand?

Former Treasury secretary Ken Henry has made two important contributions on this topic in the past week. Yesterday at a forum in Canberra, he pointed out that the bill for government services is rising thanks to our ageing population, and that the current tax revenue streams won’t deliver the money needed to pay those bills.

His solution is to revive one of the key recommendations of the Henry Tax Review — an increase to GST revenue. That recommendation was killed off by Treasurer Swan, who no doubt foresaw the political trouble it would bring down on Labor’s head.

In fact, if Opposition Leader Tony Abbott opposed a GST increase, he’d also be making trouble for himself. His ambitious plan to forgo both carbon tax revenue and mining tax revenue, while maintaining front-line services and tax cuts and pension increases, will need all the help it can get on the revenue side.

Which would just leave the Greens to block GST reform on the grounds of social equity. Henry is calling, again, for not only an increase in the rate of GST, but its extension to education, health and food — the exemptions that John Howard conceded to make the tax sellable.

The social equity argument might work with voters, but there is a very clear counter argument — without increasing this tax, it’s likely we’ll see a deterioration in social services. Moreover, a consumption tax is one tax that wealthy people can’t avoid. Forget the sub-$1000 products bought online from overseas that are GST-free. If you really want to take from the rich and give to the poor — a la the Greens’ socialist program — a higher GST would really put a floor under the kind of social services they support.

But I digress.

The other vital point Henry made, is that the “structural adjustment” to our economy — in which less-productive workers are laid off by non-resources-linked firms, to become more productive workers for resources companies — will continue. It won’t stop. It’ll go on and on and on. Get the picture?

Super profits might be evaporating, but Henry argued last week in a presentation at Melbourne’s Victoria University that Grylls’ vision is essentially correct — labour will continue to drift to the resources sector, despite only “normal” profits being on offer.

That is another added cost for the federal budget. First, social services help ease the transition for retrenched workers. Second, the federal government has a major role in funding training programs to help reskill workers to join the FIFO workforce or to move permanently to resources regions.

If Labor and the Coalition could stop bickering for a moment, they’d realise that neither side will be able to form the next government with enough tax revenue to cover the day-to-day running of the country without listening to Dr Henry.

Perhaps GST is the one issue on which they could send a bipartisan message to the electorate: “You want budget surpluses and social services? Well somebody is going to have to pay some tax.”

*This article was originally published at Business Spectator