If you think things are tough in Australia, it means you haven’t been around very long. As the odious Chopper Read might say, you need a dose of harden-the-f*ck-up.

Both the money market and tabloid media have discovered in a matter of days that an economy that’s been running uncomfortably close to capacity is suddenly off the boil. This revelation has hit a generation prone to believing what it writes about itself — that it’s just so unfair desirable inner-city accommodation is expensive, like, it’s morally outrageous.

For those who have known nothing but good economic times, slower growth or even a flat economy immediately lends itself to lots of scary headlines involving the R word.

It doesn’t help that Kevin Rudd has been weak in handling that suggestion. Lindsay Tanner — the man who increasingly looks like he’d make a better Treasurer — was more successful in suggesting such talk is certainly premature.

Yes, retail sales have flat-lined and credit growth dramatically slumped and there remains a serious credit crisis at large, but there are three key reasons why Australia shouldn’t have anything like a real recession:

  1. The Reserve Bank has a great deal of dry powder ready to fire if it thinks the economy needs stimulus. The RBA has sufficient corporate memory not to want to repeat the charge of the last recession — that it left rates too high for too long;
  2. The China story lives. Beijing is still moving a couple of hundred million peasants from being low-productivity farm workers to higher-productivity urban workers over the next decade — and that requires a very large amount of infrastructure investment. Exports to the US can continue to fall and China will still record strong growth and will still want to buy our resources and invest in their production.
  3. Just as the RBA has sought to slow the economy (a euphemism for taking out the least productive enterprises) to make room for the commodities and infrastructure boom, the Federal Government has the money to stimulate demand should too much spare capacity emerge. Kevin Rudd wants to be Prime Minister for more than one term.

And then there are host of peripheral reasons, including our ability to quickly restrict the supply of new labor coming into the economy should unemployment become uncomfortable. Some folks might think there’s a disconnect between rising unemployment and gross immigration this financial year on its way towards 350,000 people. (Without mentioning the possibility of rising unemployment, Paul Sheehan poses the unspoken immigration question in the SMH today, as Crikey has previously. Look out, Paul — you’ll be called a racist.)

Sure, growth is slowing — it needed to. And when growth slows, some geographies and industries feel the pain more than others. And that makes us adjust, change jobs, perhaps change where we live. It happens. We’ll deal with it — and there’s probably not a better country to be in right now facing such challenges.