Seems an odd statement. Australian economy is awesome, transitioning from resource to service long before it needs to... Which part of the future isn't bright?
Exactly what about it is awe-inspiring? In what services does Australia have an intrinsic advantage, or an advantage that will remain for the medium to long term? Why is a service economy a good thing?
Australia went through the entire commodities boom without posting a current account surplus. Australia has been a net debtor every year since 1973. Australia has no money to invest in itself because its population is too busy borrowing money from overseas to speculate in real estate such that shitty brick veneer houses built in the 1960s are worth 1 million dollars.
Our economy is so dependent on borrowing from overseas for "growth", that if we stopped borrowing and started paying back, then our economy would shrink, due to all the interest going overseas. Unlike Japan, for instance, Australian private debt is ultimately owed overseas, in another currency.
If that borrowing had been directed towards productivity rather than real estate speculation things might be better.
As it stands, the really expensive real estate is nothing more than a massive overhead for the economy. I challenge someone to argue how it aids Australia's productivity and competitiveness.
If GDP is increasing, there is no reason to get account surplus, but instead to manage debt/growth ratio. Admittedly Australia hasn't done too well on this recently, but it's still in a good position (~30% of GDP). Unless you subscribe to the "Countries should be run like households" school of economics.
Service based economies are desirable because they are human resourced (i.e they are renewable), and given Australia was resource based, there was a significant risk it could just sit on that and fall apart when it runs out. I'm not sure what you are talking about with "Intrinsic advantage"... Are their states with service based intrinsic advantages?
The awe-inspiring part: The economy has done nothing but grow (in recent years, and has been one of the only ones to do so).
Is it perfect? not at all. But seriously, you've got to have pretty massive global blinders on to say its future is not bright.
I am not talking about government debt. I am talking about private debt.
Australia has a much much worse private debt problem than a government debt problem: total private debt ~150% GDP; mortgage debt ~80% GDP; gross foreign private debt ~85% GDP; gross federal public debt ~20% GDP [1].
The reason you take on debt matters. Almost all of that debt went towards unproductive bidding up of real estate. Much of the "growth" experienced in the last 20 years was just making the economy larger by importing more money via debt from overseas. I challenge anyone to argue that was a prudent course of action, unless you were a political party that wanted to get re-elected by making people feel richer.
Why intrinsic advantage? Australian wages/salaries are high, in part, because the average Australian has to pay so much to service their mortgage debt. Because service economies are human resourced, any where with humans can do those jobs. If Australia is inherently more expensive due to the overhead of high house prices, what services can we offer for which others are willing to pay a premium? Also, we must have a service economy bringing money in from overseas, rather than just supplying services internally, because we still have all that interest to pay on our debt.
The future for Australia might be bright in as much as it is slightly less dark than some other countries.
Australia's competitive advantage is the rule of law. This is the main reason it and places like Canada are valued by foreigners buying real estate.
Australia is particularly valued as the only non-city-state country with close to perfect rule of law and predictable individual rights in Asia, i.e. a relatively short flight away from the homes of the current buyers. Fancy taking a punt on the direction foreigner investment rules are taking in the next ten years in Indonesia?
Arguably, Singapore's and Hong Kong's economic success stems from similar concerns.
http://en.wikipedia.org/wiki/Dutch_disease
(Also from The Economist initially)