Tipping Point: The prevalence of a social phenomenon sufficient to set in motion a process of rapid change; the moment when such a change begins to occur. – Oxford English Dictionary

As Malcolm Gladwell says in his book, when the tipping point is reached little things can make a big difference.

While Gladwell was largely writing about society and ideas, in the markets the impact of the tipping point, the butterfly effect, or whatever you want to call it can be even more extreme due to the fact that the price for assets, both physical and derivative, is set at the margin and that sentiment, in setting that price, often trumps reality.

Over the past few weeks sentiment toward Australia and the sustainability of the mining boom has been changing. We’ve been talking about the fall in the prices of our bulk commodities for a long time and the impact this is going to have on our national income and it seems that the global financial press has now taken up the cudgels. Everywhere from Financial Times to the Sacramento Bee the talk is that the mining boom is over, that China is not going to stimulate in the manner it did last time that the forward looking indicators of global growth are parlous.

But here at home we see business leaders, commentators and politicians in a tizz, either denying there ever was a mining boom, saying it never mattered anyway, or saying it will endure for another 20 years. And just to add to the confusion, the Australian government has distracted the electorate by removing the carbon price floor of $15 a tonne and offering a big new dental package. With risks to balancing budgets from mining now compounded by risk to balancing budgets from carbon and teeth, our AAA-rating looks even more at risk.

While we don’t want to get into a partisan slinging match, foreign investors and media are watching this with incredulity. Before, Australia looked so smart: it had escaped the GFC, its banks were worth more than Europe’s (despite serving a tenth the population) and its property market continued to outstrip wages, rents and inflation. But now, Australia looks dumb: it’s hitched its wagon to a flailing Chinese dragon, its got a series of budgetary black holes and its political debate looks as crazy as a Republican primary.

What happened to Australia’s counter-cyclicality? What happened to Australia’s competitive advantage? Are Australia’s banks really worth that much when you can get a Credit Suisse and a Standard Chartered for the price of a CBA? Are Australia’s houses good value when a shack in Byron costs more than a flat in Paris? Are Australian wages reasonable when a truckie in Kalgoorlie earns more than a team in Jo’burg? Is Australia’s dollar fairly priced when it buys you an ice-cream in Brisbane for a dinner in Singapore?

Some are seeing this sudden crescendo of negative overseas sentiment towards Australia as a crowded trade, but once the herd starts moving, those in the way better get out.

And just like that fabled moment in time, when the grounds of the Imperial Palace in Tokyo were worth more than the entire real estate market of California, we wonder if a tipping point has been reached.