IF you want to understand why the Reserve Bank is lifting interest rates, take a look not at the property market in Melbourne - but at the billions of dollars once again being tossed around in and around our mining and resources industries.

Yes, what's happening in the property market is not exactly unconnected. But the 'root cause' is the erupting, potentially mother of all, resources boom. The 'causer' so to speak is of course China.

The deals start with those multi-billion contracts. Over the old favourites coal and iron ore and normal gas - the, well, gaseous, type.

But even more dramatically also the sort of gas - so-called coal seam gas - for which we are yet to see a single plant built.

That's what I call a boom. When major companies are prepared to pay billions to buy into, and then promise to invest billions more to build what is essentially an idea into a project.

True, probably a very good idea and ultimately a realisable one. But still at this stage, an idea.

From those sorts of deals to the very real billions of very real dollars in existing production of again, especially iron ore and coal.

BHP Billiton and Rio Tinto have scored big time with their iron ore. First the price. Up around 100 per cent this year. With Chinese buyers grudgingly conceding to now pay much more than they rejected as too much last year.

In some ways even more tellingly, agreeing to a new way for the price to be set: quarterly and 'by the market'.

Then on to the return of takeover offers in the sector way above market. The latest, saw the giant Peabody Coal company lifting its bid for Macarthur Coal from $13 to $14 a share.

Further, the clear import, obviously unstated, is that if Macarthur actually welcomed it, Peabody would go even higher.

The offer was met with entertaining derision from Macarthur's erstwhile partner, Asia's Noble Group.

But far from Peabody protesting too much, as Noble suggested, Noble's dismissive response revealed how it was proposing to steal Macarthur at yesterday prices, while at the very same time proclaiming the developing boom to come!

Originally published as This is the boom behind the rise