Clive Elliot Jennings Real Estate. Agents specialise in Applecross, Mt Pleasant, Booragoon, Myaree, Fremantle, Bicton, Perth, South of the River

AUSTRALIA'S two-speed economy, which has the resource-rich states of Western Australia and Queensland, dramatically outperforming the southern manufacturing states, has just got worse, or better, depending on which side of the border you sit.

The reason, and this takes a bit of explaining, Is because we appear to be avoiding an outbreak of Dutch Disease.

Unknown to 99.99 per cent of WA Business News readers, Dutch Disease is not something which attacks elm trees (that's Dutch elm disease).

Dutch Disease, in its purest form, is a foreign exchange crisis experienced in a country which suddenly discovers a treasure trove of resources - and suffers a soaring currency which destroys its manufacturing sector.

It got its name after the Netherlands discovered natural gas in its part of the North Sea in the 1960s. By the mid -70s, as great wealth was generated by production of gas, the Dutch currency soared in value, killing a wide range of manufacturing industries and prompting the Economist magazine, in 1977, to invent the phrase Dutch Disease.

Australia in 2006 is different for one critical reason - the resources boom is not affecting the entire country, and therefore is not affecting the value of the currency. For WA this is an astonishing situation and goes a long way to explaining why property values are soaring in Perth and not in Sydney, and why mining and oil company shares are soaring at the same time as property.

Quite simply, we are having the best of all worlds and it really has reached the "pinch me, am I alive?" phase of the greatest boom we have ever seen.

What we're watching is high world mineral and oil prices drive WA's trade performance through the roof. Last year, WA's numbers revealed a trade surplus of $28.3 billion - while the rest of the country posted a trade deficit of $17.1 billion.

If WA was an independent country, and if WA had its own currency, the full benefits of the trade surplus, and new investment being attracted by high commodity prices, would be lost. The 'WA dollar' would be soaring in value against other currencies, especially the US dollar, slashing mineral sales profits (as reported in "WA dollars') and sharply reducing new project investment.

As you may have noticed there is no 'WA dollar'. We are still using the South Pacific Peso {also known as the Australian dollar) and it is failing in value because the big manufacturing states of NSW, Victoria and South Australia, are in the doldrums.

There are a number of lessons from this non-outbreak of Dutch Disease.

 Firstly, it is the single most brilliant reason to get the last of the secessionists to shut up. Being part of Australia, with its low-value dollar, is of immense benefit to WA.

Secondly, there's no obvious change ahead - and that means the good times just keep on rolling, and the "what if it continues" question raised recently by Briefcase becomes even more pertinent.

What if the boom lasts longer (much longer) than anyone had previously thought possible? Apart from the obvious winners, such as home and share portfolio owners, there are downsides.

First home buyers are being saddled with enormous loads of debt and government services, as mentioned before, are at breaking point now.

But if the dollar remains low and if commodity prices stay high, the outlook for WA is quite remarkable.

There is another downside to all this good news. The boom is creating a classic speculative bubble with hot money from Sydney and Melbourne pouring into the WA property market as everyone else in the country catches on to the fact that we are having our cake (high commodity prices) and eating it (low dollar).