The exceptional luck of higher incomes thanks to the mining boom is over for now and productivity growth is the main game, Australia's central bank says.
The move is the most important one facing Australians because it will dictate the growth in living standard, Reserve Bank of Australia (RBA) governor Glenn Stevens says.
"I noted two years ago that while our terms of trade are handed to us, for better or worse, by international relative prices, the efficiency with which we work is a variable we can actually do something about," he told a Committee for Economic Development of Australia (CEDA) event in Melbourne on Tuesday night.
"If we want to speed up the growth of economy on a sustained basis, it will be about raising productivity performance."
Productivity had been declining in Australia for more than a decade, he said.
He praised the Productivity Commission, but said its work was hindered by vested interests resisting its proposals, partisan politics and state-federal sphere difficulties.
He also hinted at future interest rate cuts, while addressing the challenges faced by an economy in transition.
The RBA released minutes from the bank's November 6 board meeting on Tuesday.
During his address, Mr Stevens reiterated that future changes to the cash rate had not been ruled out.
"The board felt that further easing might be required over time," he said.
"It was also conscious, though, that a significant easing of policy had already been put in place, the effects of which were still coming through and would be for a while.
"In addition, the latest inflation data, while not a major problem, were a bit on the high side, and the gloom internationally had lifted just a little. So it seemed prudent to sit still for the moment."
The RBA had previously cut the cash rate in May, June and October to its current level of 3.25 per cent.
Mr Stevens said domestic data - particularly for growth and inflation - would provide guidance on future moves.
Speaking of longer-term trends, he said Australia's economy was in transition, as terms of trade fell from historic highs, and the resources sector moved into another stage.
"The terms of trade have peaked, and will probably have fallen by about 15 per cent by the end of this year," he said.
However, talk of an end to the mining boom was "somewhat overhyped", he said.
Investment in mining projects was the next phase, now that commodity prices had eased, and was likely to peak sometime in 2013 or 2014, with the third phase of extraction and export of resources still to come, particularly with regard to gas projects.
"With the peak in the investment phase of the mining boom now coming into view, the question naturally arises as to how the balance between the various types of demand in the economy will unfold," he said.