An improving and stabalizing unemployment situation is certainly not reflected in the monthly tax receipts published by the RBA. Individual taxes have decreased from their peak by about 2%, Superannuation retirement taxes have decreased by over 40%, Company tax has decreased by 18%, and overall Total Annual Tax has decreased 2.9% from its peak.

With Home prices showing large price gains, and interest rates on the rise, the net effect cannot be anything less than the household budgets being caught in a cash squeeze. The taxation figures certainly justify the annual $107 Billion deficit spending (8.5% of GDP) by the Federal and State Governments, but the increasing interest rates are certainly questionable.

A near bankrupt country like Greece is having apoplexy in having its 10 year bond yield around 6.5%, and demanding the EU to provide subsidised funding. The current yield on 10 year Australian Government bonds is 5.77%. No wonder the Australian dollar is going up. Not only do you get a great yield, you get one of the best rated Government credits in the World, and once you convert your currency into A$ to invest into the bonds, the A$ is likely to give you a currency capital gain. Highlighting Australia's yield is Bernanke's statement that he expects ZIRP (Zero interest rate policy) to remain in place for some time. Even though the RBA cash rate is 4.25%, it is currently quite common for the local Australian banks to offer 5.75% at call just to attract deposits. Structurally, I would question how healthy the deposit raising ability of the banks is if they need to pay such a large margin over the cash rate to remain funded.

Again, highlighting the structural deficiencies of our economy, Banks continue to reduce the lending to the business sector whilst chasing the home loan market. Business lending is down 10% from December 2008, and home loan lending has increased 13%. Lending on home loans is less capital intensive, so the banks strategy has been to increase its' overall lending by 8%, whilst reducing the capital required to support their loans by 1.8%. It is a win-win situation for the banks. They increase their lending and reduce their risk. And as far as self fulfilling prophecies go, the easy credit for home loan lending is causing asset prices to rise, making the lending look even safer.