It’s like we’ve entered a post-boom twilight period, when all the hard economic data says the economy remains strong, but all the anecdotal evidence and consumer and business confidence levels suggest something terrible is coming. With each drip of bad news, it becomes more and more difficult to remain some basic optimism about the Australian economy.

The Reserve Bank and the Treasury learnt a lot from the last recession. So did the rest of us. We’re far more economically literate, particularly in our understanding of the role of monetary and fiscal policy in managing booms and busts. We know what levers the government and the RBA have at their disposal and what they’re trying to achieve when they pull them. And we know about the ripple effect of job losses. We even know about the paradox of thrift.

But that, apparently, isn’t helping us. It turns out that even those who learn the lessons of history are sometimes doomed to repeat them. The more the likes of Ken Henry and Glenn Stevens warn of us talking ourselves into recession, the more likely that prospect seems. We know how this performance ends, but we’re sticking doggedly to the script.

There’s not a lot politicians can do. The Government handing money to low income earners who’ll have virtually no choice but to spend it makes sense, but there’s only a limited number of times a $10b heart-starter can be administered to the economy. Even the Opposition has been doing its bit lately, prefacing virtually every statement on the economy with the mantra that Australia is best-placed to weather these difficulties.

And there’s not much businesses can do without demand. It’s actually up to us consumers to realise Australia’s economic fate is in our hands, and act accordingly.

Peter Fray

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