AN 1838 account of Port Adelaide in South Australia described it as Port Misery, unsurpassed in “everything that is wretched and inconvenient.” That seems like a long time ago. The port is now full of the things Australia grows and the things it digs up. A bumper crop waits in the port's grain silos. Mineral sands, such as zircon, sit under a tarpaulin. Iron ore, set to become Australia's biggest export, fills scores of blue containers on the wharf side.

Five years ago a shipload of iron ore bought 2,200 flatscreen TVs, says Glenn Stevens, governor of the Reserve Bank of Australia (RBA). Now it buys 22,000. The terms of Australia's trade—the price of its exports, relative to the cost of its imports—have improved by 42% since 2004. Commodity booms have come and gone in Australia's history but no boom this strong has lasted this long (see chart 1).

Over the coming weeks, The Economist will profile several economies at the centre of wider global trends. The first is Australia, a bellwether for other rich commodity exporters such as Norway, where the terms of trade have improved by 38% since 2004, Canada and New Zealand.

How long will the commodity boom last? Demand, especially in China and India, should continue to strengthen as these countries require more steel, food and fuel. However, some of that demand may be unsustainable, argues Warwick McKibbin, an outside member of the RBA's rate-setting board. Policymakers in some emerging economies have been too reluctant to tighten monetary policy in advance of America's Federal Reserve, he points out. This monetary ease showed up quickly in flexible commodity prices, but has yet to feed through into the price of other goods, such as manufactures, many of which Australia imports. When these stickier prices eventually rise, Australia's terms of trade will deteriorate, even if they do not go back to 2003-04 levels.

The other blade of the scissors is supply. Australia is investing heavily in new mines, quarries and gas fields. And it is not alone. “There is no shortage of coal and iron ore around the world,” says Chris Richardson of Deloitte Access Economics in Canberra. With prices so high, miners will eventually unearth it. “All the more reason to make hay while the sun shines.”

As Australia rushes to make hay, some worry that it will forget how to make everything else—an antipodean version of “Dutch disease”, in which a natural-resources boom boosts currencies and hurts manufacturing exports. In March the Australian Manufacturing Workers' Union launched “Manufacturing: Australia's Future”, a campaign demanding R&D incentives, more apprenticeships, and “buy Australian” requirements for government projects. In a February survey of manufacturing chief executives, 93% said their exports cannot compete when the Australian dollar buys more than $1. On March 31st, it bought $1.033 (see chart 2).

A strong currency is, however, necessary to keep inflation in check. As prices rise quickly in Australia's booming industries and regions, the RBA can meet its inflation target only if prices elsewhere fall. Over the past 18 months the RBA has raised its key interest rate by 1.75 percentage points. These hikes, according to Joaquin Vespignani of Barclays Capital, have no effect on the mining industries, which sell and borrow abroad. Higher rates and a stronger currency do, however, hurt firms in manufacturing and construction, as well as states, such as Victoria and New South Wales, where these sectors loom.

In principle the RBA could change its inflation target, ignoring prices in the mining state of Western Australia and perhaps the Northern Territory. One outside economist even floated the idea with the RBA. “They just started talking about cricket,” he said.

One reason may be that Australia is close to full employment. The jobless rate is 5% and projected to fall. In the past firms would import labour. But Australia's economic recovery has coincided with an ill-timed tightening of immigration policy: it admitted 36% fewer net newcomers in the year to September 2010 compared with the previous year. If the country is fully employed, its boom industries cannot grow unless other industries shrink. No tinkering with monetary policy will change that.

Australia could bring some relief to squeezed exporters by saving, not spending, the proceeds of the boom. That would reduce the inflationary pressure at home, resulting in lower interest rates and a cheaper exchange rate. Households are doing their bit, saving 9.7% of their disposable income compared with less than zero in 2004. The government is also tightening its belt, albeit more gingerly. Having run a budget deficit of 4.4% of GDP in the last fiscal year, it expects a surplus in the fiscal year ending on June 30th 2013, including the proceeds from a mining tax.

Should it tighten its belt faster? In Chile a fiscal law obliges the government to run budget surpluses whenever the economy is at full employment and the copper price is above its long-run equilibrium, as estimated by an independent panel. A similar rule in Australia would imply a budget surplus of 2% this year, argues Mr McKibbin.

Chile's government adds to a “stabilisation fund” in fat years, and withdraws from it in lean. Australia has its own Future Fund, where it sets aside money to pay for the pensions of public-sector workers. But Mr McKibbin is not alone in thinking that Australia should have its own sovereign-wealth fund to invest money overseas, like Norway's huge fund.

Should the government do more than get out of the way of the boom? One traditional fix is tariffs and subsidies, which can offset an uncompetitive exchange rate. The government recently imposed fresh anti-dumping duties on Chinese imports of sodium bicarbonate, for example, at the request of Penrice Soda Holdings, Australia's sole producer of soda-ash crystals, which appear in everything from animal feed to antacids. But Australia—a small, open economy—has learnt to reserve such measures only for a handful of egregious cases.

Rather than seek government help, firms are encouraged to raise productivity and improve quality. At Penrice's plant in Osborne, for example, the workforce has shrunk even as their qualifications have risen. The plant's 200 workers must now be computer-literate, although their collars are not yet entirely white. One worker gives a misbehaving funnel a good whack: “you can never stop an operator using a sledgehammer,” a plant manager says.

Even if the strong dollar hurts Penrice's profits, the mining boom does have some benefits: the company sells some of its soda ash to miners, such as Uranium One, which will mine the metal in South Australia and export it, probably to Japan and elsewhere. Penrice's neatly packed, granular bicarbonate still appeals to fastidious customers in Japan, where it puts the fizz in bath salts. It even sells its pharmaceutical-grade crystals to China, for use in dialysis packs.

Imports, especially of capital goods, also play their part in Australia's exporting success. In the plant's control room, Penrice's workers watch crystals form on the outside of a vacuum-drum filter. Where did they buy the filter? China, of course. “You get more bang from your buck,” the plant manager explains.