THE bad news for Tasmania is that the state has been ``bashed about the ears'' by Australia's two-speed economy, Deloitte Access Economics economist Ian Harper said this week.
``That has come about because much more of Tasmania's economy is exposed to trade and therefore exposed to the exchange rate than the mainland - that's the bad news,'' Professor Harper said.
The good news for the state is that as the exchange rate comes off, as we pass through this transition, we can expect Tasmania to respond more strongly than other parts of the country, Professor Harper said.
The Melbourne-based economist presented his more optimistic view than most on Tasmania's economic future at this week's state jobs summit in Launceston.
Professor Harper was invited to act as moderator for the summit by the Tasmanian Chamber of Commerce, which organised the event in response to the state's horrific unemployment figures.
The unemployment rate for the state peaked at 8.4 per cent this week, which is the worst in the country and the highest it has been in Tasmania since the mid 1990s.
There will be more pain for about 12 to 18 months for the state, Professor Harper said.
``But the message to you is that you must not see what happens in the next 12 to 18 months as a harbinger of where you are heading,'' he told those at the summit.
``We are in transition, we are changing and change [often] looks like failure half way through.''
Professor Harper said that response to the various phases of the mining boom would mirror Australia's and Tasmania's recovery.
``The mining boom has three phases - the first phase was swept up by the development of China,'' he said.
``That has now peaked. Phase two is the investment phase - that too is soon to peak.''
The phase two investment boom had been the largest economic boom recorded in Australia's history, Professor Harper said.
``That is why those parts of the economy that have stuck under the burden of the two-speed economy have suffered so much,'' he said.
``What you are experiencing here in Tasmania I regard as an echo of that.
``What you are experiencing is the transition - the grinding as we come back up from what has been a massive mining boom.''
Phase three of the mining boom is the export stage, he said.
And that's where the bright light at the end of the tunnel lies for Tasmania - an export phase with a lifespan of 20 to 30 years.
Professor Harper predicts that the mining part of the economy, which makes up about 20 per cent will ``pull right back'' in the next few years and the other 80 per cent of the economy will take over.
He is banking his light at the end of the tunnel argument on the Australian dollar exchange rate continuing to fall away.
If the exchange rate continues to fall, cash flows will pick up quickly, he said.
A huge percentage of the Australian economy is trade exposed - more in Tasmania than anywhere else - so we will quickly feel the benefit, he said.
``This economy is extremely responsive to international developments, always has been,'' he said.
``The Tasmanian economy is even more responsive.
``As the exchange rate for the Australian dollar comes off, you here in Tasmania will experience up levels as well because you are more trade exposed than the rest of the country.''
Growth will come but it will be growth in the public sector - in the areas of health and education - rather than the private sector, Professor Harper said.