But as BIS expects the Australian dollar to hold around its current level for the next few years, the non-mining parts of the tradeables sector will continue to suffer from Dutch disease, where booming resources exports drive up the exchange rate to the detriment of other exporting or import-competing sectors.
"The high Australian dollar is driving structural change, with the impact on competitiveness creating enormous pressure and resulting in job losses in other trade-exposed industries: manufacturing, tourism, education and business services."
Stimulated by recent interest rate falls, residential investment should start growing from late this year to address the dwelling shortage which has developed, especially in New South Wales.
This would heighten competitive pressure on New Zealand companies for people in the building trades. "We are forecasting employment growth in the Australian construction sector to reach 5 per cent by the middle of next year," Hampton said.
Business investment in sectors other than mining, now below the levels required to underwrite even moderate demand, will also recover as capacity constraints emerge.
After a sharp pullback in spending and increase in the savings rate (to around 10 per cent) in the immediate aftermath of the global financial crisis, Australian households had been increasing spending in line with income growth over the past two years, Hampton said.
But up until the beginning of this year much of the extra spending was happening overseas, encouraged by the high Australian dollar. "In the past six months we are starting to see them spend more of that money domestically which is helping the retail sector a bit."
BIS Shrapnel expects solid population growth, underpinned by a rebound in immigration, combined with around average employment and wages growth, to continue to support growth in household spending.
But because of high levels of household debt it would not approach the giddy heights of the debt-fuelled spending spree of the early to mid-2000s.
Meanwhile firms with market power, like the banks, utilities and major supermarket chains, are doing well. Demand for healthcare has also remained strong.
"But small and medium-sized businesses with little economic power, and those which rely on servicing non-mining investment, are [largely] languishing."
Hampton expects inflation to be pushed up above 3 per cent over the next three years, largely as a result of high rates of inflation in rents, utilities, other housing-related costs, health, education and child care.
As the economic upswing gains momentum he expects the RBA to move to more restrictive interest rate settings, raising its cash rate to 5 per cent by mid-2015 (it is 3.5 per cent now) implying variable mortgage rates of 8.25 per cent.
As with any economic forecasts, there are risks around the central scenario. Europe's chronic difficulties top the list, with the potential channels to the Australian economy being weaker business and consumer confidence, lower commodity price and tighter bank funding conditions.
"A more enduring risk is that the significant under-investment in the non-mining industries and infrastructure gradually erodes the medium-term growth potential of the economy, and leaves the Australian economy increasingly sensitive to large fluctuations in world commodity prices."
BIS Shrapnel believes increased supply, rather than a want of demand, poses the greatest risk to commodity prices. A fall in world demand would create a much stronger shock, but some of the impact would be offset by a fall in the exchange rate and lower interest rates.
Going Dutch
* Australia continues to face the "Dutch disease" which originates from a crisis in the Netherlands in the 1960s when discoveries of vast natural gas deposits in the North Sea caused the Dutch guilder to rise, making exports of all non-oil products less competitive on the world market.
* In the 1970s, the same economic condition occurred in Great Britain, with the North Sea Oil boom leading to a soaring pound and then recession when British workers demanded higher wages and exports became uncompetitive.