It's far from smooth sailing ahead, but much of the gloomy talk is little more than scaremongering

1. Australia survived the global financial crisis unscathed

One problem with getting through the GFC without going into recession is that it's easy to think it was really no big deal. But even if you survive a car crash and say "well, at least we're in one piece", that doesn't mean there are no negative effects (or costs).

In the 10 months from August 2008 to May 2009 the unemployment rate rose from 4.0% to 5.8%. That was as fast as occurred in both the 1982 or 1990 recessions. The Australian stock exchange fell more than 50% in value from the end of 2007 to the middle of 2009. It is still about 25% below that 2007 high.

And what really smacked us is that this all happened at the very time many of the baby boomer generation were reaching retirement age. The economy thus has had to cope with the double whammy of a drop in participation and output that occurs during any downturn, and the first real hit from the ageing workforce.

It remains amazing Australia got through as well as we did.

2. The GFC is history

Surely it is. I mean, c'mon, that was four years ago!

Here we talk of the GFC, but head over to the northern hemisphere and they talk of "The Great Recession". How bad are things still? The Eurozone economy has now contracted for the past six quarters in a row. That's going backwards for a year and a half. The news from the UK is only slightly better. By growing a mere 0.3% in the first quarter this year it narrowly avoided going into a triple dip recession.

Triple dip. Contemplate that for a moment.

But China will save us, right? Sure it may be our biggest export market, but Europe is China's biggest. So if Europe isn't demanding tonnes of products made out of tonnes of minerals we ship to China, that hits us. And this month Chinese manufacturing activity has declined for the first time in seven months.

So sure, the GFC hit in 2009, but we need to stop pretending it was a blip in our rear-vision mirror.

3. Our interest rates are at emergency levels

The current cash rate (the rate set by the Reserve Bank) is 2.75% – 25 basis points below the level it reached during the GFC. Surely that means it's at emergency levels.

Nope.

It just means you can't judge the economy across time looking at only the interest rate. Back then our dollar was at 60 US cents and GDP growth looked as though it was heading down a long sewer.

Now our economy is growing just below average, but inflation is as low as it has been for 40 years, and we are in a bizarre situation where we can report the dollar has fallen to 96 US cents.

Since the GFC there has been a structural shift in the cash rate. In the three years before the GFC the cash rate had averaged 6.1%; for the past three years it has averaged 4.1%. (As a comparison: during the entire Howard government the cash rate was never below 4.25%.)

What used to be standard is currently abnormal.

The worry is whether reducing rates further will be effective. There aren't many people out there thinking they would buy a house if only interest rates weren't so high.

4. We are in a budget emergency

The word "emergency" is getting tossed around a fair bit. In his budget reply speech, Tony Abbott declared a budget emergency and later he also said the Government didn't have a revenue problem, it had a spending one. Logically, then, he could pledge a surplus in his first year in government just by cutting all that flabby spending. That he isn't pledging that suggests maybe there is a bit more going on.

Australia is going to have to deal with the structural deficit we've been in since 2007-08, made more difficult as we'll be getting less revenue than we could count on in the early-mid 2000s. But if the budget signalled an emergency the market would have turned quickly against Australia. And it hasn't.

The ratings agencies reacted to the budget with a ho-hum. Standard and Poor's noted, "the government continues to demonstrate a commitment to prudent fiscal policy over the medium term, in our view". And government bond yields (the interest rates for government bonds) are lower now than they were this time last year, when a surplus was being projected - a sign of investor confidence.

There are big issues with the budget, but calling it an emergency is just scare-mongering.

5. We blew the budget more than anyone else

This myth is linked with the first – that is, we blew the budget on a bit of a nothing economic event, the not-very-damaging GFC. Some commentators have even suggested Estonia's austerity economy should be our guide, which is curious given its economy, only the 100th biggest in the world, is still about 4% smaller than it was in 2007, whereas ours has grown by more than 13%.

Yes, our debt increased due to the GFC, but it did so in almost every country. From 2007 to 2012 the gross debt of all governments (federal, state and local) in Australia rose from about 9% of GDP to about 27%. That sounds pretty big, but it is below the average of all major economies in that time.



And while we had the 20th largest increase in debt, we had the fifth largest increase in GDP.

Leave Estonia to the mythmakers, reality champions Australia.