Joe Hockey recently said it was only "clowns out there talking about recession". Well, with falling commodity prices, slow wage growth and a looming housing bubble, I'm ready to join the circus, writes Stephen Long.

"This is the recession we had to have," Paul Keating infamously declared in November 1990. Twenty five years on, are we headed for the recession we can't avoid?

Not according to Joe Hockey. Before he got dumped as Treasurer, big Joe pooh-poohed the "clowns out there talking about recession and dark clouds on the horizon".

But I'm happy to join the circus.

Granted, a recession isn't looking imminent. But it's well overdue. And the risks are plain to see. The economy is in a parlous state.

Falling national income, combined with stagnant wages and record household debt leaves the country highly vulnerable to an economic shock.

The commodities boom that buoyed Australia's circumstances for a decade is well and truly over.

As China's economy slows, along with other emerging market economies, a further downward spiral in the price Australia gets for its key resources exports is threatening.

Assurances that all would be OK because the price falls would be offset by rising export volumes are looking hollow.

And there's not a lot to replace the mining boom with.

Australia's export base narrowed during the resources rush as a high exchange rate hollowed out the economy. We're yet to see manufacturing and services exports step up despite the lower currency.

So far, the Reserve Bank has managed to maintain growth by cutting the cash rate to a record low.

But the sustained low interest rates designed to boost sluggish economic growth in Australia have created housing bubbles in key cities such as Sydney and Melbourne.

Wages are growing at the slowest pace on record; yet household debt in Australia is at a level without parallel in history.

In the June quarter, the ratio of household debt to disposable income hit a new record, just shy of 186 per cent.

The debt burden is extraordinary: the level of household income being gobbled up by interest payments is far higher now than in the late 1980s when mortgage interest rates were at 17 per cent.

There's more than a whiff of Ponzi about the real estate boom.

Rental yields are ridiculously low - so low you could get a better return putting your money in the bank.

Yet at least until recently - when the banking regulator imposed limits on lending - investors kept piling in, lured by outlandish capital gains.

It's been a speculative frenzy.

This entire edifice is underpinned by record offshore borrowings by Australian banks and other home lenders - funding that is vulnerable to a global shock that could freeze the international capital markets once again, or ramp up the cost of borrowing.

I've always been of the view that, prior to the onset of the global financial crisis, Australia was lucky to avoid a housing market bust that could have induced a recession.

In a sense, we were saved by the financial chaos off-shore: until the crisis hit, the RBA appeared likely to keep on ramping up the cash rate in response to inflationary pressures induced by the mining boom.

That, in turn, would have driven mortgage interest rates to double-digit levels, pushing indebted households over the brink.

Now the debt load is even bigger - with property prices vulnerable to a normalisation of interest rates or rising joblessness.

If we're lucky, the property boom will top out, prices will ease, and some air will wheeze out of the bubble; lower auction clearance rates and easing prices in western Sydney suggest we might have already seen the peak.

But if there's an external shock, things could be ugly.

It's not hard to imagine a property bubble bust coinciding with a collapse of commodity prices, creating a vicious cycle of bank losses, corporate collapses, mass job shedding, and falling consumption, as demand plummets and wealth is destroyed.

The Minsky moment, down under.

Who knows what the trigger might be, but as Satyajit Das wrote, the risk of an emerging markets crisis is very real, with Australia's fortunes tied to the emerging markets of Asia.

Many Australians are too young to remember the last recession in this country, beginning in mid-1990, which saw indebted businesses dropping like flies, the unemployment rate soar to 11 per cent, and commercial property prices halve.

The period since is the longest any country has gone with uninterrupted growth, other than the Netherlands, which experienced 27 years without a downturn before the GFC.

Three more years and Australia makes history.

If not, send in the clowns. Don't bother, they're here.

Stephen Long is an economics correspondent at the ABC.