Fariborz Moshirian is a professor and the director of the Institute of Global Finance at UNSW Business School. The IGF conducts collaborative research on systemic risk, financial innovation and global financial stability. Moshirian spoke with Julian Lorkin for BusinessThink.

An edited transcript of the conversation follows.

BusinessThink: How important has mining been for the economic history of Australia?

Fariborz Moshirian: The mining sector has always been part of modern Australia since the late 18th century. They discovered coal in Newcastle in NSW early on; and of course we had the Aussie gold rush, which started in 1823, and by 1850 Australia was supplying 40% of the entire gold in the world. And so Australia became quite wealthy as the result of exports of gold.

And later on we found more gold, copper, and zinc in Western Australia, and in Queensland, by the late 19th century, and of course that laid the foundation of the modern mining sector in Australia.

But what we've seen, which was a turning point for us, was in the 1960s where there had been significant investment in equipment, new companies emerged, and these companies basically took us to where we are now with the exports of iron ore, coal and other resources.

BusinessThink: In 2008 to 2009, the rest of the world went through terrible times, but Australia didn't suffer so badly. Is that purely due to the mining boom?

Moshirian: There is no question that the mining boom has been important. Let me first say that our banking sector had been quite sound, because we went through our banking crisis 10 years earlier, or even longer than that, and therefore the banking sector in Australia, and similarly in Canada, was much better than the experience in the US and Europe.

But at the same time, to your key question, the mining sector has assisted Australia because from the year 2000 to 2012 the mining sector in Australia increased by 120%. And in effect, by 2012 it was forming 9% of national income of Australia. And so there's no question that the mining sector had been assisting Australia throughout the global financial crisis.

'There’s no question that the mining sector had been assisting Australia throughout the global financial crisis'

- FARIBORZ MOSHIRIAN

BusinessThink: In the last Budget, forward estimates are dependent on a continued mining boom, with iron ore helping revenue. Does that mean the economic future is then looking rosy?

Moshirian: That is a good question and I don't have a full answer for you because we can't really predict the price of iron ore and other resources, for instance, from now until the next, say, three, four, five years time. But all indications are that the Chinese economy is doing well, there are demands for resources, and therefore the price of iron ore and coal could remain quite healthy in the foreseeable future and there's no question that they generate extra income for the Australian economy.

BusinessThink: Is it an all-eggs-in-the-basket type scenario as we're putting a lot of dependency on just a few large mines?

Moshirian: I think all indications are that we need to diversify our economy. At the moment, almost one-third of our exports consist of iron ore and coal. We need to diversify, we need to move into other business – agribusiness, for instance, where we're dealing with 800 million middle-income consumers in Asia; wealth management; education. There's no question that we need to diversify. But of course there are other promising resources like LNG.

BusinessThink: And that huge amount of LNG could generate a lot of income?

Moshirian: That's right because, for instance, when you look at the future of LNG in Australia, when everyone is looking for cleaner energy in Asia, by 2020 Australia is going to be the largest exporter of LNG in the world. [The producers] have already got contracts of almost 20 years with China, Japan, South Korea, India, and of course all indications are that LNG is going to add substantially – we're talking something [around] $200 billion-plus over the next eight to 10 years – to the national income of Australia.

And almost we can argue that LNG may bring something like about 7% to 8% of GDP of Australia in the not-distant future and so that could be almost an addition and, if someone is very pessimistic about mineral resources, we could say a substitute for iron ore and coal.

'I think the first key prerequisite is investment in infrastructure that the current government is doing'

- FARIBORZ MOSHIRIAN

BusinessThink: Often, if there is a political wobble in the South China Sea, the prices of iron ore and coal decline. Is the economy flexible enough to withstand shocks with China, our largest trading partner?

Moshirian: I think that's a very good question and also that particular customer might end up with more suppliers from other parts of the world, and of course internal issues might emerge in China. And for that very reason we really need to have more discussion about the future of the Australian economy, which is growing, and should be more diverse, and basically not rely only on resources as the main source of income.

BusinessThink: How does the economy move away from iron ore and coal, and diversify? What about agribusiness, and the service sector?

Moshirian: I think the first key prerequisite is investment in infrastructure that the current government is doing. We need to invest more in infrastructure. We need to increase our investment in human capital when it comes to science, technology, maths, medical research, and really allow, if you like, agribusiness, for instance, to become a great supplier of food for the 800 million middle-income consumers [in Asia], as I said to you earlier on.

With regard to wealth management, we have got a great fund management industry. We need to expand it. The education sector in Australia is the third largest export revenue for Australia. There are significant capacities to be expanded. I think that shouldn't be underestimated. And of course, telecommunication and other high-tech should assist Australia to diversify the economy in the next five to 10 years.