With annual growth rattling along, if not at warp speed, then at a fairly robust 3.1 per cent over the year, it might be seen as signal for Australian bears to capitulate and head back into hibernation until the next sniff of recession is in the air.

The first quarter GDP number puts Australia well ahead of the pack.

South Korea is some way behind on 2.7 per cent, the US and UK back further on 2 per cent, Germany and Canada around 1.5 per cent, while Japan is stalled at zero.

The economy is also well ahead of its so-called potential growth rate, which had been thought to be around 3.25 per cent, although pulled back to 2.75 per cent on recent estimates from the Treasury and Reserve Bank.

That reduction in potential growth comes at a heavy cost.

Treasury has estimated that a 25 basis point cut in potential growth rate subtracts around $9 billion from the underlying cash balance over the four years of the forward estimates.

However driving along above its "potential" doesn't mean the economy is about to blow a gasket, merely that it is operating above a theoretical level of output where inflation is contained.

So while economies can operate above their potential for a while, it can come at the cost of higher inflation; something that isn't a big worry in Australia at the moment.

Facing worst decade of income growth in half a century: NAB

Prior to the first quarter National Accounts being released, the NAB's group economics team downgraded Australia's potential post-GFC growth rate to an even more pedestrian 2.25 per cent.

Interestingly, despite this glum view of the future, the NAB team was one of the few tipsters to nail the unexpectedly strong first quarter GDP number.

The NAB's low growth potential thesis is based on the fact that productivity growth has slowed noticeably in Australia since the 1990s.

"However, the negative impact on potential growth and national income has been postponed by the temporary offsetting effects of the mining boom," NAB said.

"With those offsets now unwinding, if nothing else fills the gap, Australia may experience its worst decade of national income growth — and potentially a deterioration in living standards — in nearly half a century."

Evidence of that is already showing up in the breakdown of the national accounts.

GDP in the March quarter was supported by a surge in export volumes.

While the headline GDP was hauled up by a surge in export volumes, primarily commodities such as iron ore and coal, falling prices are crunching nominal GDP and national income.

Chief economist at RBC, Su-Lin Ong has long argued the various income and nominal GDP measures are more important than the output measures for an economy that continues to undergo and adjust to lower terms of trade, or the ratio of export prices to import prices.

Australia's terms of trade — which can also be seen as the amount of imports an economy can buy relative to a unit of imports — has fallen around 36 per cent since peaking in late 2011.

"Real gross national income remained weak at 0.3 per cent in the first quarter with the annual rate stuck in negative territory at -0.4 per cent, where it has been for the last 12 months," Ms Ong said.

"And, our favourite measure of living standards — real net national disposable income per capita — fell for the ninth consecutive quarter … the slow slide backwards continues," she noted.

A "momentous task" to replace the mining boom

With the "once-in-a-generation" mining boom now coming to grinding halt, what will be left behind to fill the massive hole in the economy left by disappearing mining investment and falling commodity prices?

The NAB argues it will be "a momentous task" to fill the void, noting that in the 12 years to 2012, the terms of trade contributed more than $160 billion to real national income — that's almost $8,000 in per capita terms.

"Importantly, the terms of trade helped to more than offset the post-1990s slowdown in labour productivity growth, postponing a hit to national income and living standards," NAB senior economist James Glenn said.

"The contribution has now turned negative, and with commodity prices not expected to rise to previous levels any time soon, there is a real risk that average living standards could deteriorate without some kind of an offset, namely from stronger productivity-driven GDP growth."

Central to the NAB's lowering of potential growth estimates are some rather large structural forces apart from falling productivity; namely labour force participation and population.

While Australia has experienced a substantial rise in participation rates over the past 30 years — rising from around 60 per cent to 65 per cent now — it appears to have plateaued, and is now heading down.

Falling participation and aging population to slow growth

Treasury's Intergenerational Report forecast it will be heading back down towards the mid-1980s levels over the next 40 years.

An ageing population is slowing potential growth says Societe Generale. ( ABC Central West: Melanie Pearce )

"If the labour participation rate does decline over time, one obvious consequence is that growth in the workforce would be lower for any given rate of growth of the population," said Klaus Baader, chief economist for Asia Pacific at Societe Generale, pointing to a recent study on Australia's future labour market trends.

"That in turn means that the potential growth rate of Australia's economy will slow."

On Societe Generale's analysis the run-up in the participation rate has been driven almost entirely by women, as participation rates for men have declined almost continuously since 1978.

"The trend increase in female participation rates has clearly flattened out in recent years, suggesting that a sustainable equilibrium may have been reached, or at least is close at hand," Mr Baader said.

Added to that, an ageing population which is growing more slowly means economic growth is facing a substantial demographic headwind.

Productivity to remain disappointing: NAB

The NAB report forecasts overall productivity will remain disappointing, especially in comparison to the 1990s, which saw the benefits of structural reforms and significant technological progress in information and communication technology.

"Other potential drivers of lower productivity will include significant sectoral shifts underway in the economy, the most apparent being in the mining sector - mining productivity has been negatively affected by long investment lags and increased mining of marginal deposits," NAB found.

"While this will improve near-term as production in mining picks up and investment trails off, this will only provide a temporary boost to productivity."

Australia needs to double productivity to stay still: IMF

Not that Australia is alone enduring falling productivity, with a recent report from the International Monetary Fund finding there was slowing growth broadly across most advanced economies.

It was a familiar theme the IMF identified, reflecting, "not only the reallocation of resources to sectors where productivity growth was slower, but also declining productivity growth within those sectors which increasingly account for the bulk of employment and economic activity".

The IMF suggests the challenge for Australia is that it will need to double rates of productivity growth just in order to sustain growth rates of the past.

But it is a case of catch up with Australia's productivity lagging well behind the US which is pretty well out at the technology frontier.

The IMF study found that even by bridging half the gap over the next decade or so would push Australia's potential GDP growth well back above 3 per cent.

NAB's James Glenn noted this is one reason to be hopeful.

"Given the gap (with US) remains wide, (it) suggests there is significant scope to improve efficiency," he said.

However if that gap isn't if not bridged then narrowed, the robust economy evident today will be on the skids and so will Australia's standard of living.