MOST governments sex up their economic records. Australia's is sexing its down. For a year the prime minister, Kevin Rudd, has been issuing dire warnings about a “long, tough and bumpy road”, and this summer, he advertised his jauntily entitled essay, “Pain on the Road to Recovery”, with the mantra that Australia was “not out of the woods yet”.

Which is slightly odd. Unlike in most rich nations, national income in Australia, buoyed by strong exports to Asia and resilient household consumption, actually grew in the three months to June by 0.6% and was higher than at the same time last year. Unemployment remained flat at 5.8% yet again in August, below its 30-year average of 7.2%, and far below the peaks of the early 1990s. The stockmarket has risen 43% since March; house prices in Sydney and Melbourne are up and business and consumer confidence are at or near two-year highs. Financial crisis? What financial crisis? Australia's big banks have reported huge profits in the past 18 months, expanded overseas and tightened their hold on the domestic banking market too.

The government seems to believe its own propaganda. In May it proposed a budget deficit in 2009-10 of 4.9% of GDP, which would be one of the biggest federal deficits since the second world war. Torrents of spending are pouring down on public buildings, home insulation, rail crossing gates and pension payments. After fending off a High Court challenge in April the government sent off cheques worth A$900 ($640) each to taxpayers earning less than A$80,000 a year. It has also guaranteed bank deposits up to A$1m at no charge, and remaining bank liabilities for a small fee.

Critics fret about both the details and the scale of the spending. Following accusations of waste, the Senate and the auditor-general (who answers to Parliament) are separately inquiring into the stimulus spending on renovating school buildings. The opposition's Treasury spokesman, Joe Hockey, reckons that planned spending is “completely out of proportion”. Rumour has it that the finance minister, Lindsay Tanner, agrees, but is overruled.

But market economists are grateful. “The economic stimulus caught the economy before it fell,” says Rory Robertson from Macquarie Bank. “There were no prizes for being half-hearted,” opines Matthew Hassan from Westpac, another bank. The government is popular among voters too. Sinclair Davidson of the Institute of Public Affairs, a think-tank in Melbourne, concludes that a combination of “gloomy rhetoric and massive spending is the perfect strategy: a hedge against bad news, and a reason for good.”