The Australian money market's behaviour last week illustrated its tendency to react with surprise to well-anticipated events.

On Monday and Tuesday, the futures market's pricing showed the cash rate was expected to be three per cent in the middle of next year.

Cash has been at 3.5 per cent since a cut in early June.

But by the end of the week the market was factoring in a cash rate of 2.8 per cent, giving a 2.75 per cent cash rate a much greater chance than the earlier-favoured 3.0 per cent.

The change happened in the absence of any notable Australian economic data releases.

There are several explanations for it.

One centres on the minutes of the US Federal Reserve's July 31/August 1 policy meeting.

The minutes signalled the Fed was likely to resume force-feeding the banking system with cash "fairly soon" unless incoming data showed a substantial pickup in the economy.

That tacit admission that the US economy had failed to thrive might have implied a tougher time for Australia.

But market-implied expectations of bigger falls in the cash rate had emerged well before the minutes were released on Thursday morning (Australian time).

They may have encouraged the market trend, but did not start the ball rolling.

Then there's China.

A preliminary reading of HSBC's widely-watched purchasing managers' index (PMI), showed China's manufacturing sector weakened in August, reversing a tentative positive signal from the July report.

But that, too, was on Thursday, when the Australian money market had already begun its bullish run.

But there was a key event the day before.

It was the announcement by BHP Billiton that it had shelved a planned $US30 billion expansion of its Olympic Dam mine in South Australia.

The effect was reinforced by Federal Resources Minister Martin Ferguson the following morning in an interview on ABC radio.

"But you've got to understand, the resources boom is over," he told the interviewer.

That comment has since been clarified to confirm a sequence of events that observers of the Australian economy had been confidently anticipating in broad terms for several years now, and have already had partially validated.

The commodity price boom peaked last year, as expected.

The resource investment boom will most likely peak in 2013/14, and the peak in mineral production is still years way.

It's a very familiar story which was not challenged by the events of last week.

Even the axing of the Olympic Dam expansion gels with any reasonable assessment of the outlook, including the quarterly monetary policy statement from the Reserve Bank of Australia (RBA).

"The forecasts continue to embody reasonably conservative assessments of the likelihoods that large individual resource projects currently under consideration do proceed," the RBA said in the report on August 10, nearly two weeks before the Olympic Dam news.

Still, the market responded, not as if Olympic Dam was a surprise, which it was, but as if it was a shock that any project might have been axed, which it most surely wasn't.

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