The mining export boom is continuing to deliver Western Australia nation-leading economic growth, but this could end unless it gets some fortuitous help from China's central bank, writes Greg Jericho.

Last week's annual release of the state accounts by the Bureau of Statistics showed that Western Australia and the mining industry remains the powerhouse of the Australian economy.

The state accounts showed that the mining boom remains, but it is a very different type of boom - and one that won't bring anywhere near the level of work that the first stage of the boom did. And while the transition from the first stage of the mining boom has seen the RBA cut interest rates, ironically interest rate cuts in China might keep the second stage of the mining boom going.

The news about the mining industry is largely focussed on iron ore, and for iron ore all the news is about the price, and it is all bad. This week the price fell below US$70/tonne - making it nearly a 50 per cent drop since the US$135/tonne price in December last year:

Coupled with the falls in iron ore prices - and largely because of those falls - has come the steady news of the past 18-24 months that investment in the mining sector has also been falling, and falling sharply.

The report on Monday that BIS Shrapnel has forecast mining investment over the next four years to fall 40 per cent was a stark but not surprising assessment of the industry. Mining investment in just the past year has fallen 11 per cent, and the June quarter capital expenditure of $20.5bn was 14 per cent down on the high of $23.96bn that occurred in the September 2012 quarter:

A further fall of 40 per cent would see levels back to those observed in 2011.

Given the boom in investment on the back of booming iron ore prices has led WA to be the best performing state every year since 2008-09, this drop in investment was seen to signal the end of the WA economic joy.

Indeed, given the Gross State Product figure only comes out once a year, some commentators were using the quarterly state final demand figures (which exclude trade) to suggest that last year WA had fallen into a recession.

Thus it was a bit of a reality check to find that the state accounts showed that Western Australia's economy grew by the most in the country (excluding the small economy of Northern Territory).

In 2013-14, WA's economy grew by 5.5 per cent, well ahead of the next best performer of Queensland with just 2.3 per cent:

Even in per capita terms it was well in front of the pack. Its 2.6 per cent growth fairly dwarfed the rest of the nation which averaged a mere 0.8 per cent growth:

So if not mining, what is fuelling this economic growth in WA?

Well, actually it is still mining.

The investment phase of the mining boom is largely over. There is still massive amounts of actual investment, but no more growth. Now we are on to the production/export phase.

One of the ironic aspects of the massive boom in iron ore prices is that it didn't fuel an equally great boom in exports.

From 2003-04 to 2008-09, investment in WA rose by 87 per cent, but exports only grew by 20 per cent. And even this did not bring a great deal of extra income to the state because much of the investment required importing large machinery from overseas and thus imports in WA grew by 101 per cent in that same five-year period.

This meant that during this period, net exports (i.e. the value of exports minus the value of imports) fell 6 per cent.

But in the second phase of the investment boom that occurred after the GFC, a very different picture started to appear. Since 2008-09 investment still grew - though because it was coming off a higher base it did not grow by as much in the initial phase - but by this time all the investment since 2003-04 meant that many more mines were at a stage of being able to start exporting iron ore.

And less imports of capital equipment were required.

All up it meant that from 2008-09 exports from WA grew by 34 per cent, imports increased by just 12 per cent, and net exports went up by 50 per cent. As a result, in the five years since 2008-09, WA's economy has actually grown by more than in the five years to 2008-09:

But it is a different growth, and this is most clearly seen in the employment picture.

From 2003-04 till the start of 2013, as the mining industry boomed, so too did employment in the industry.

But since February 2013, despite the fact that in 2013-14 the mining sector contributed 3.1 percentage points out of the 5.5 per cent growth in the WA economy, employment in the industry has fallen.

It requires a lot fewer people to ship iron ore off to China than it does to build a mine in the first place. So the production/export phase will not be an employment phase, and yet in the past year employment in WA grew by 3 per cent - well above the national average of 1 per cent.

The big driver has been the construction industry.

Since February 2013, WA employment has increased by around 37,000 people; the construction industry alone has increased employment by 14,100. This was well ahead of the 9,500 extra employment in the second-best performing industry of transports, postal and warehousing and, more than enough to account for the 12,300 fewer employed in the mining sector.

The record low interest rates have helped fuel housing construction in WA. In the 12 months to February this year, housing approvals in WA grew by 23 per cent. This is well above the levels seen during the first phase of the mining boom when WA housing approvals never grew by more than 11 per cent.

This result has been precisely what the RBA hoped when it began cutting rates back in November 2011.

But housing approvals based on low interest rates can only go on for so long - a strong economy elsewhere is needed. And the more the iron ore prices continue to fall, the more the volume of production and export of iron ore needs to make up to keep things even. And when you have prices falling by 50 per cent in one year, that's a hard act to achieve.

It means the export boom may begin to stop delivering to WA the great nation-leading economic growth.

One reason the price of iron ore has been falling is that the prices of housing in China have been falling since May. In October, prices fell in 69 of the 70 major cities. And in only 3 of those 70 cities were housing prices above what they were a year ago:

The decline in housing prices has fuelled a decline in growth in housing construction and thus a decline in growth of demand for iron ore from China. And this has occurred at the very moment that a decade's worth of building mines has meant supply of iron ore is exploding.

But there is one small chance of help from China, and ironically it comes in the same form that has helped keep WA's employment growing while jobs in the mining sector disappear.

On Monday the Chinese central bank announced it was cutting interest rates by 40 basis points. It is hoped this will cause a boom in housing prices that drives an increase in housing construction (as it did in Australia when the RBA did the same thing). And for Australia that means another increase in demand for our iron ore to be made into steel.

If it works, it may mean that WA can owe its continual spot at the top of the Australian economic premiership table to two central banks - one in Australia and one in China.

Greg Jericho writes weekly for The Drum. His blog can be found here and he tweets at @grogsgamut. View his full profile here.