The former treasurer says Australia’s housing market could prop up the economy during a downturn in mining profits.

Wayne Swan, the man who was Federal Treasurer until a few weeks ago, said in a speech in Sydney that while some mining bosses may be losing steam, investment in non-mining projects such as housing development is increasing.

“It's true now but it will be even more apparent [soon] that Australia's continuing prosperity, our capacity to raise our living standards, will depend on the four-fifths of our economy which is not mining or farming or manufacturing, and which, except for construction and utilities, is all services,” Mr Swan said, “there will come a point in the next decade or so when mining output growth will slow down.”

He says people should not worry that a shift in economic driving forces would lead to instability. Mr Swan says the change is occurring gradually; “On the transition to non-mining sources of growth, we are seeing signs of gathering strength in the housing market and other non-mining investment," he said.

The former treasurer thinks that success will not rely on unfettered growth in China to support the mining sector, but rather on diversifying the economy to make the most of the structural shifts happening in Australia.

Mr Swan’s comments come at the same time as some official figures which seem to contradict it, showing a decline in new home construction in the first three months of this year.