Too much government intervention on hobbling parts of the Australian economy could backfire and weigh down the country's interest rates, according to treasury secretary Ken Henry.

While not entirely ruling out the active participation of the federal government in the developing the Australian economy, Mr Henry said on Monday that dipping its fingers on troubled sectors could bring considerable impact on the dynamics of the local economy.

He also testified before a senate hearing that the resources industry is poised to alter the structural make up of the economy as the mining industry gears further on its anticipated expansion for some more years to come.

To positively deal with sagging sectors of the Australian economy, the treasury secretary suggested that the federal government adapts a policy of industrial transition instead of pouring resources to shore up struggling industries.

Such endeavour, according to Mr Henry, could prove wasteful of taxpayers' money and non-beneficial for the local economy over the long haul.

He said that lowering corporate tax could instead encourage recovery on sectors hampered by high capital expenditures and in the long run, the government would better serve the economic interest of Australia by focusing "on businesses that have a long term future."

For now, Mr Henry said that many business operations are absorbing the negative effects of the high-flying Australian dollar while the country's higher interest rates are discouraging demand improvements for a number of business sectors, which is a general trend that would be sustained for some more period.

The bright side however, is the continued growth of the resources industry as Mr Henry said that the boom being seen in the mining sector would lead to a significant tremor in the Australian economy that he stressed would bring about long term changes.