A key measure of the value of final production in the economy per head of population, GDP per capita, has grown by a subdued 0.9 per cent over the past year. But what is perhaps more concerning is that quarterly growth in GDP per capita, in trend terms, has slowed from 0.4 per cent in the December quarter last year to zero in the September quarter just gone.

When GDP per capita is adjusted for movements in our export prices, we see that the resultant "real gross domestic income" statistic has actually fallen by 0.2 per cent in the September quarter. If we consider the seasonally adjusted data, Australian real gross domestic income has fallen over the last two consecutive quarters, which has led some to conclude we are facing an "income recession".

What this all means is that we are still producing more valuable goods and services, although at a worryingly slow pace, but we are earning less from that additional production than before. Almost every economist in this country has sounded warnings in recent years that the good fortune of sky‑high prices for our traded commodities would not last.

And so it is that the end of the Mining Boom Mark II is coming to pass, with iron ore prices, for example, plunging from about $US180 ($218) a tonne in 2011 to about $US70 a tonne today.

A continuation of such trends would surely compromise our ability to continue to enjoy decent living standards and that alone ought to serve as a wake‑up call for reform‑shy politicians and vested interests, as well as the Australian public at large.

Outgoing Treasury Secretary Martin Parkinson outlined the nature of the task at hand in the following way: "unless we tackle structural reform, including fixing our fundamental budget problem, we will not be able to guarantee rising income and living standards for Australians".

For better or for worse, we have faced situations before when the world has become far less willing to pay top dollar for the stuff we produce, and we have had to adjust accordingly.

During the late 1970s, for example, strong global demand for coal, including in response to oil price shocks during preceding years, translated into a doubling of global coal prices and a fresh optimism for significant mining investment domestically. In exuberant anticipation of a massive lifting in production and incomes, unions demanded, and received within the framework of a centralised IR system, significant wage increases, feeding into strong price inflation.

But a global recession began soon afterwards, and the associated slump in coal prices left key mining investments stranded and contributed to economy‑wide increases in unemployment.

In 1980 a group of economists, including Wolfgang Kasper, Richard Blandy and John Freebairn, co‑wrote an influential study which was to inform the policy stances of governments arguably for decades to come. Their book, Australia at the Crossroads, painted a gloomy scenario of low GDP per capita growth, of 1.7 per cent a year, for an Australia which refused to embrace supply‑side reforms over a 20‑year period. They said that by contrast, if a comprehensive agenda for reform was pursued GDP per capita growth would almost double from 1973 to 2000.

Although Crossroads was written from the perspective of Australia's much longer economic underperformance from World War II, it helped serve as a lightning rod for a bipartisan political acceptance of a wave of structural reforms during the 1980s and 1990s. The benefits of that reform agenda have been unmistakable, with Australia enjoying continuous economic growth for two decades and displaying a better capacity to flexibly respond to beneficial terms of trade booms and adverse external shocks alike.

But the economic good times, especially over the decade before the GFC, lulled policymakers, and perhaps many Australians, into a false sense that reforms could be paused, or even that frivolous policy escapades could proceed without cost. The experience of these past few years, and even of recent months, should well and truly cast those false beliefs aside.

The accumulations of extravagant public spending, wildly prescriptive regulations and an uncompetitive tax regime, which stymie productivity gains when growth is on the slide and incomes are waning, suggests that, once again, Australia is at a crossroads. No amount of careless political clarion calls for Australians to fritter away their disposable incomes on consumables, reflexive demands for the Reserve Bank to further cut ultra‑low interest rates, or another bout of loose fiscal Keynesianism will get us out of the emerging mire.

We need to recognise that even half of the reform agenda outlined during the 1980s and 1990s, including in Crossroads, which would expand Australia's productive envelope and secure future living standards, has yet to be embraced.

Australia remains encumbered by a massive governmental role in redistribution, bureaucratic regulation continues its relentless march, and policy consistency is still dashed by the cut‑and‑thrust of lobbying and political concession‑making. Ending the federal budget emergency should be a starting point upon which all political actors, whose primary concern should be long-term living standards for ordinary Australians, ought to agree.

Clearly, there has been precious little agreement to date, but perhaps there is a prospective solution in the offing, composed in two parts. To avoid the political pain for the government of "losing" interest groups because of selective expenditure reductions, perhaps the government should pursue equi‑proportional spending cuts right across the board. The "unfairness" accusation levelled against ad hoc fiscal consolidation would be quelled in an instant.

This strategy could be coupled by a comprehensive agenda of deregulation, which economically emancipates individuals, especially people on lower incomes, from the stifling strictures of bureaucracy. The states and local governments should also be willing participants in this grand reform venture. In tandem, the proposals would catalyse a new growth wave, without strict reliance on a new commodities boom, and ensure that Australians innovatively and productively trade their way out of the national income slump.

We would have nothing to lose but our languid growth record and receding national income.

Mikayla Novak is senior researcher at the Institute of Public Affairs (www.ipa.org.au)