Until a couple of years ago, the mining sector did the heavy lifting for the Australian economy. Then came the China slowdown and the crash in commodity prices.

Fortuitously, Australia had a spare tyre – the building industry. With the demise of manufacturing and the scorching of commodity prices, said building industry has been the powerhouse sector that has kept the economy buoyant for the last couple of years.

However, a huge inflow of Chinese funds has helped, as the Chinese are anxious to migrate capital out of the country and have invested heavily in both commercial and residential properties since 2014. This has spiked property prices and abetted unprecedented levels of high rise development.

In my experience, the word on the street – banter with taxi drivers, café latte with real estate agents – is where you get the “bad oil” first. The street usually tells you what’s going on well before – months before – it hits the papers and the word is that January 2016 is the beginning of the end of the building boom.

The skeptic will say “rubbish, look around, cranes every where, the joint’s jumping, can’t get builders, cant get tradesmen….” This is all true, but its all “WIP,” work in progress. The real story that will unfold over the next few months will be the drop in new starts, particularly in high rise developments. So why January 2016? The big reason is that China is now imposing capital migration controls on citizens and the frothy, frenzy like property prices that defended 2015 will be a thing of yesteryear. The game changer is China.

Odds are this will not play out well. Touch wood, there’s about 12 to 18 months WIP left in the pipeline. Without the octane of Chinese investors snapping up homes, be they top end or middle end, be they preferred epicentres or residential development sites, the market will increasingly have to rely on homegrown purchase power.

However, because the Chinese frenzy has forced residential prices up, the locals have had to borrow heavier to get into a toppy market. Whereas the mobile Chinese have been paying cash, the locals have been buying with debt and now the banks are tightening up their lending conditions. It follows that the industry will slow down and will at best head towards a very anaemic 2017 unless another a white knight materialises in the near future.

The impact on the broader economy will be terrible. I was watching the Sunday Agenda programme on Foxtel and Paul Kelly and company were saying that Prime Minister Malcolm Turnbull faces tremendous if not unprecedented economic challenges because Australia doesn’t really control its fiscal destiny anymore – world events do.

Further, in the post mining boom paradigm, it is difficult to fathom what the new economy is. We aren’t the US, we don’t have the Silicon Valleys, we can’t innovate our way out of the mire. Manufacturing is pretty much dead, so we don’t have that to fall back on. And here is the really frightening thing: the spare tyre – the building industry – is getting frayed, wobbly and has a finite and diminishing lifespan. Once the sector runs out of puff, absent a spare tank, the Australian economy will pretty much run on empty. With a drop in new starts, there will be a drop in stamp duty. With less property turnover, capital gains tax receipts will plummet.

So somehow, the Feds and the states and territories have to keep the building industry going. But there has to be a plan. Australia, like Lee Kuan Yew did years ago with Singapore, has to sell itself to the world. It has to trumpet its stable government, its Torrens system, its stable land title system, because in an unstable world, land title, robust law and order, stable banks and what was once called the tyranny of isolation, can be spruced as the security of isolation.

Australia needs to encourage India, Malaysia, Singapore and Indonesia to invest here, to pick up the ball that China has been running with. Australia also needs to look further afield to Russia and Europe, and even to the US. For fear of sounding elitist, we need to encourage the affluent to buy into Australia, to bring their money in to inflate the coffers. But how?

Infrastructure

Time to start pump priming the infrastructure spend. We need VFTs from Melbourne to Geelong, from Sydney to Canberra so that said regional townships can become outer suburbs of the major metropolises. This will boost the regional economies and make city to region and region to city more cohesive and accessible. It will also take pressure of overwrought infrastructure limitations of the big cities.

Build the icons

Who said we can only have one true architectural icon – the Sydney Opera House? Where is Melbourne’s international icon and where was it ordained that one international icon will do? Build and they will come. Innovative gob-smacking architecture has to be encouraged and rather than engaging in design claustrophobia discussions, free the discussion up and encourage architects to develop that which can be held in awe, the gasp factor as it were, as this will bring in tourists.

There are huge challenges confronting Australi; the country is facing the headwinds of crashing commodity prices, a manufacturing rust belt and a building industry that is running out of steam. The new economy is yet to be fashioned, so the only hope for Australia in terms of maintaining a good standard of living, pending a more buoyant commodity regime, is to keep the building industry firing.

Time is of the essence for leadership to grab the bull by the horns and do something dynamic and fresh. Otherwise there will be a hangover, and it will be one that will linger.