It takes two graphs to put the current mini-panic over the iron ore price into perspective, to realise that Australian miners should eventually do quite nicely out of the present shakeout.

That's with the obvious caveat that first they have to survive the rationalisation. Some won't.

That's unfortunate for the marginal mines' owners and employees, but it's hardly surprising that the highest-cost producers fail when prices come off the boil. It's as normal in mining as drought is in farming. And from the overall Australian economic viewpoint, it doesn't matter.

It's the nature of news to favour the biggest number, the scariest percentage, the sharpest comparison. (There are whole blogs devoted to frightening punters into reading.) Thus you will have seen plenty of mentions about how far the iron ore benchmark has fallen so far this year or, even more dramatically, since its peak four years ago.

A quick glance at the accompanying 20-year graph shows why no-one bothers to talk about how it compares with anything much before that. Iron ore is back where it was five years ago, but remains sharply higher than any point prior to that.

Prices soaring over the past decade have had the inevitable result of spurring a sharp increase in supply, which inevitably reduces prices. Like every boom that ever was in any commodity, the animal spirits tend to get a bit carried away on the upside and some projects that shouldn't have started come to an end.

The prime fundamental of increasing steel consumption as developing countries develop remains in place. China's steel intensity has a long way to run yet, never mind the billions of people yet to get to China's stage.

There is a bigger fundamental commodities story about the nature of global growth at present, about it being dominated by emerging nations for many years to come, about commodities prices being artificially low over the previous couple of decades. That was summarised in a HSBC economic report yesterday that preposes current commodity prices are only getting back closer to their long-term average.

The relatively good news right now though is in the accompanying graph lifted from a section of last month's Reserve Bank statement on monetary policy devoted to the iron ore and coal cost curves.

The red bits represent the production costs of various Chinese iron ore mines, the pumpkin/beige bits (no, I have no idea why the RBA selected pumpkin as the national colour – they're economists) represents Australian mines, blue is Brazil and the rats and mice are whatever the other colour is.

It shows that the vast majority mines with production costs above $US80 a tonne are in China. A lot of those red pixels on your screen turn into red ink at current prices. Most Australian iron ore production is nicely below the top quartile of expensive miners.

Thus, if the iron ore market is rational, it's mainly those expensive Chinese mines that should fold first, taking out a couple of hundred million tonnes of production, which should allow prices to firm up a little.

Blow the froth off the top of the production bubble (if that's not confusing metaphors), and most Australian mines should do nicely enough.

The catch here is just how rational the market might be. The former head of BHP Billiton's aluminium and nickel operations, Alberto Calderon, has been scaring local miners by reportedly claiming China's high-cost producers will survive the low prices.

Perhaps scarred by his aluminium experience at the hands of Chinese producers flooding that market, Calderon believes China will open new mines and not trim overall production much at all.

There is another factor here though – the quality of much Chinese iron ore. It's not up to Australian and Brazilian standards and therefore is dirtier to use in a country that is starting to take pollution seriously. And Chinese economic policy continues to evolve – for all the conflicts of provincial governments, Beijing is steadily less interested in propping up expensive dirty operators.

Meanwhile, even as the price cycle rolls along, the macro impact on Australia hasn't been as shocking as some commentary might have you believe.

Yes, iron ore is our biggest single export and its price is down this year by a third or so – which, on the surface, might mean we're going to suffer a sharp fall in export income.

But the price fall has been almost matched by the increase in production, meaning there's not much difference in total export revenue. How long that stays the case depends on how long it takes this cycle to roll through.

Then there's the great unknown of exchange rates. If at some stage the Aussie dollar does what it's supposed to do when commodity prices soften … but forecasting the Aussie is indeed a mug's game.

By way of uncomfortable contrast though, the RBA graphs for coking and thermal coal aren't nearly as nice – the Australian pumpkin is well represented at the expensive end of production costs.

Australian mines of all colours are sharply reducing their costs. In some cases, the cost cutting is nothing short of spectacular, so the RBA data may be a little out of date.

Nonetheless, it would be a brave soul who believed the coal industry wasn't facing considerably more pain than the iron ore miners.