Consumers have gone into their shells. Which is bad news if you’re a retailer or owner of shopping centres, but not so bad if you’re an economist who worries about Australia’s record CAD, its credit rating or the overgeared nature of Australian households’ balance sheets.

Soggy house prices are partly to blame, and this won’t be quickly reversed. House prices are way overvalued and likely to remain that way for years, says AMP’s investment chief Shane Oliver. I guess that’s better than a dramatic fall with its flow-on effects to the overgeared and the overinvested. The RBA did its bit yesterday to keep the show on the road by doing nothing.

Others have pointed out that house prices recovered quickly from the “recession we had to have.” The difference this time is that, compared with the early 1990s, Australia is better managed but the world – importantly the US – is less well managed. US monetary policy has been very loose and US fiscal policy is far too expansionary. When US excess is unwound, the Australian economy and Australian house prices will be thrown around like small boats in a big storm.

Read more here.