On any conventional reading, Australia's economic development has gone backwards and is too reliant on shipping iron ore to China. This at a time when the Middle Kingdom's debt bomb is set to detonate, writes Ian Verrender.

Here's a tidy titbit that may come in handy if you ever find yourself trapped at one of those annoying trivia nights.

Close your eyes and picture yourself in a dingy pub, roped in by work colleagues for a night of bonding, with some smug publican poised above you, secure in the knowledge that he is about to stump you, bamboozle the crowd and keep the cash in the register, where it rightfully belongs.

"For $20,000, which country separates the People's Republic of Lao and the Central African Republic?" he booms over a PA system designed more to intimidate than entertain.

A smile plays at the corners of your mouth. You stand with a growing sense of triumph, sizing up the top shelf spirits that have always been out of reach, as a hush descends over the bar.

"That's easy," you reply. "Australia!"

Yes, Australia. It may be a stretch in terms of geography. But when it comes to trade and, in particular, reliance on China, that's the territory in which we find ourselves.

Almost 35 per cent of our export trade is dominated by just one country. Of that, most consists of just one commodity: iron ore.

We're not the worst. That honour goes to Mongolia with a 90 per cent reliance on China. But given it is landlocked and borders the Middle Kingdom, that's not much consolation.

Although in 15th place globally, when it comes to trade reliance, we are rubbing shoulders with the least developed nations on earth. And when you strip it down to OECD nations, we are far and away the most exposed to China, with most European country exposure at 5 per cent or less.

We may lead first world lifestyles, and we may have just experienced the richest period in our history. But on any conventional reading, in terms of economic development, Australia has gone backwards. It is a far less diversified economy now than four decades ago.

And while some economists argue that the rise of service industries has helped offset the decline in manufacturing, the growth in service exports will never match our mineral trade. That leaves us horribly exposed to the fortunes of one country.

The extent of our reliance on China was on full display last Wednesday when the national accounts showed a surprise jump in Gross Domestic Product.

At 3.1 per cent in the year to the end of March, it was the strongest growth in four years.

How did that happen? The answer can be found in one word. China.

When alarm began to grip Beijing last year that growth was slipping and targets would not be met, it abandoned most of its promises about transitioning the economy away from investment led growth and ordered the banks to re-open the lending floodgates.

Lend they did. Chinese banks poured a record 4.67 trillion yuan ($A1 trillion) into the economy in the March quarter alone, boosting manufacturing and construction, and hence steel demand and, of course, iron ore.

Extending the China debt binge - which now stands at 260 per cent of GDP - worked; for now. But credit is expanding faster than the rate of growth and with corporate defaults at an alarming 5.5 per cent of total bank lending even before the latest plunge, many economists believe it is a question of when, rather than if, China's debt bomb will detonate with potentially serious repercussions here.

Just as in America, Japan and Europe, China has discovered that the return on debt is diminishing. It now requires increasingly more of it to produce ever smaller amounts of growth.

If last week's annual accounts provided the answer to the sudden surge in our production, they also highlighted the tragedy of just how Australia blew the resources boom and why we all feel poorer for it now.

It's true that, unlike previous episodes, for once we managed to muddle through a resources boom without a massive and debilitating inflation break-out. But this was no ordinary boom. It was bigger and lasted longer than any other in our history.

It also boosted our terms of trade and, via the magic of a surging currency, priced Australian industry out of the market.

While there were joyous celebrations in some quarters about that fabulous lift in GDP growth last week, the nation finally may have awoken to the fact that it doesn't matter how much you produce, it's all about how much wealth you generate.

On that score, we are going backwards. Net National Disposable Income fell 1.3 per cent in the year to the end of March.

The slump in resource prices is a major factor. But one of the main reasons for the income decline is that our resources industry is about 80 per cent foreign owned. That means the profits generated by that huge lift in output largely flow offshore.

That flow of foreign funds that previously financed the mine construction and inflated our dollar, has now reversed. The production side of the boom generates income for foreign investors.

Shortly after being deposed as opposition leader seven years ago, Prime Minister Malcolm Turnbull eloquently put the case for an Australian sovereign wealth fund, arguing that we had wasted every boom in history:

Governments enjoying surpluses have a strong temptation to splash money around, and while tax cuts are always appealing, cutting taxes at the top of a boom runs the real risk of creating a structural deficit when the boom subsides.

Ain't that the truth.

One of the options he canvassed was for a "stabilisation fund", where proceeds of the boom would be invested offshore, helping offset the currency effect of the huge inflow of money that put most of our manufacturing and service industries under pressure.

It all came to nought of course. As did the Minerals Resources Rent Tax. Remember that? That was an impost that would have taxed the super-normal profits of global miners back in the boom. It was a tax that would have funded a corporate tax cut to 25 per cent. And it would have been a handy way to raise cash for a wealth fund.

But it was rewritten by the three major global miners - BHP Billiton, Rio Tinto and Xstrata - to ensure they'd barely pay a cent, before being kyboshed altogether by the Abbott government.

It was a terrific win for global mining giants and offshore investors.

Unfortunately, Australians now must pick up the tab. That's why superannuation tax loopholes are being tightened. It's why we face cutbacks in health and education. And it's why the Reserve Bank will need to keep cutting interest rates.

We're churning out ever greater amounts of minerals and energy. It's just the dividends are flowing elsewhere.

Ian Verrender is the ABC's business editor and writes a weekly column for The Drum.