It's not the Howard governemnt that has made the economy boom. I...

It's not the Howard governemnt that has made the economy boom. I challenge you to name two Howard factors that have lifted the economy.

When Howard was Treasurer in the 80s he left a $9 billion deficit. Don't tell me he's a miracle worker - he's the biggest taxing and spending PM ever in our history.

Exceptional capital spending on infrastructure and household debt are the two major factors driving the economy. Add in record government spending as well.

But these things don't last, unlike sound economic management.





Low interest rates have transformed the Australian economy. Since 1997 households have borrowed on a scale unprecedented in our history. That borrowing has more than doubled household debt, almost doubled housing prices, and made real estate sexier than sex.

Everyone knows that. What they - or at least many economic commentators - seem not to know is that household debt has become the driving force behind Australia's economic growth. And when we stop borrowing, the brakes will hit our growth.

Today the board of the Reserve Bank meets to decide whether to put its foot down on the brake pedal: just a notch, but enough to tell borrowers to start reining in. We cannot afford another year in which our income grows by $40 billion, but our borrowing grows by $102 billion.

What was once superficially termed "the Australian miracle" was little more than our willingness to borrow more when our income fell, and keep spending.

The Bureau of Statistics estimates that, in constant prices, Australia's net export income since 1997 has plunged by $30 billion, no more than a quarter of it due to drought. Yet real spending per head kept growing by more than 3 per cent a year, financed by increased debt.