The facts of the matter are twofold. Global catastrophe is still potential, though the odds on a 'double dip' growth recession (or worse) are shortening. And, despite a number of strains within the Australian economy, the overall situation is still robust.

Zoellick offered what was described as a 'stark view' of the global economic outlook. The problems of European debt, Japanese stagnation and American political gridlock have been widely discussed, but he has growing concerns about the status of developing nations,

Developing nation growth will not be immune to slow growth or even renewed recession in the advanced nations. Developing nation consumers could suffer loss of confidence and business could reduce investment. The Reserve Bank’s excellent Chartpack (updated to 1 September) shows declines in global share prices and bond yields.  The data for September that will be available to the Board will show sharper falls in share prices in all countries with a distinct degree of positive correlation, refuting the usual argument for widely diversified portfolios.

Some developing nations are 'walking a monetary policy tightrope', attempting to combat inflation including high and volatile food prices without unduly slowing economies.  There is also a rising threat protectionism, and developing countries face 'increasing headwinds'.

This is potentially very bad news for Australia. So far, our lucky country cheer has sustained the optimistic case, and indeed the RBA Chartpack confirms this case, showing as it does plenty of evidence of sensible behaviour by both households and businesses.

Retail sales have slowed, but household saving is around 11 per cent of disposable income, with households demonstrating commendable caution. Overall credit growth peaked at an annual rate of about 16 per cent at the end of the long boom that came to a juddering halt with the global financial crisis, fell to a low of only 1 per cent in late 2009 and is now around 3 per cent.  Business credit was over 60 per cent as a ratio to GDP but is now around 50 per cent and presumably still falling as companies wisely deleverage.

House prices continue to fall, except curiously (it seems to this writer) in Sydney.  With the sharp fall in share prices, soggy house prices are no doubt reinforcing the case for caution.

Jobs have continued to grow, albeit at a considerably slower pace, and the overall unemployment rate has inched up to slightly above 5 per cent. While quite a few Australians would like to work longer hours, and there is another sizable group who have given up looking for work, the contrast with the situation in the USA and the weaker nations of Europe could hardly be greater.

Overall wages growth averaged around 4 per cent per annum during most of the decade until 2008, when it dipped below 3 per cent and has not yet fully recovered. This is probably just as well, as productivity growth is far lower than it was and until productivity growth recovers higher wages growth cannot help being inflationary. So far at least the switch from Work Choices to Fair Work seems to have had little influence, and there are widely disparate psychological currents for wage and salary earners.

The strong positive current is the mining boom, which the RBA Chartpack demonstrates with crystal clarity.  This occurs most clearly with the powerful contrast between the nearly vertical chart of mining investment and horizontal line for non-mining investment, both sets of expectations being adjusted for normal realisation ratios. Mining men one meets in Melbourne are deeply concerned at both shortages of skilled labor and rising costs of meeting demand.  Opportunities abound for fit and qualified young people willing to work in remote locations.

The negative effects on the psychology of wage earners are based on loss of jobs in manufacturing, highly publicised in the case of Australia’s two steel makers. Qantas’ plans to replace expensive Australian workers with cheaper overseas workers are another very public warning to reinforce Frank Crean’s wise advice from almost 40 years ago that 'one man’s wage rise is another man’s job'. Ordinary Australians in small businesses and in sectors not directly or indirectly boosted by the mining boom are well aware of the fragility of their jobs and will provide little push for higher wages.

Final figures for the previous fiscal year, 2010-11, show a deficit of almost $50 billion.  This reflects Australia’s stimulus in the form of (largely wasted or unnecessary) spending but also the weakness of tax receipts.  I suspect that, once recent fiscal trends are examined carefully by the experts, it will become evident that there is an unexpected fiscal black hole of some seriousness.  I doubt the tax 'forum' will provide agreed answers.

Tony Abbott’s brilliant campaign against great big new taxes combined with an unexpected new fiscal black hole will put immense on Australia’s recently acclaimed 'World’s greatest Treasurer'. There will be immense pressure to slash government outlays (or abandon the frequently reiterated promise to return the budget to surplus), presumably creating another contribution to this government’s growing reputation for inablilty to manage even a traditional chook raffle.

Australia’s economic weaknesses are only too evident. We have an unstable minority government with proven inability to execute overambitious plans.  We have low productivity in important parts of the economy and no agreed plan to improve this. We have an increasingly inefficient tax system, no interest in real reform to this system and little apparent appetite for cuts to government outlays to balance the books.

Thanks goodness we have an economically literate population, clear-headed business leaders and a competent central bank.

If Robert Zoellick’s warnings are not heeded, or if actions to head off the dangers he warns against prove unsuccessful, the underlying weaknesses of Australia’s 'miracle economy' will  quickly become evident.  There will be little room for fiscal action and we shall all be grateful that there is scope for monetary policy to be eased.