“Rate rise looms”, “Australian Headed for Housing Bubble”, “Banks Warned on Guarantees” were just some of the headlines from Tuesday’s Sydney speech delivered by Reserve Bank Governor Glenn Stevens, but there was a much more important message buried underneath.

Stevens told his audience that we can forget a repeat of the credit-fed, consumer booms we had from the mid-1990s to 2007.

Australians will have to recast their consumption, spend less and live much more frugally.

“If global regulators have their way, the world will be characterised by less leverage, and scarcer and more expensive credit, than in the earlier period. We here in Australia have to accept that fact and accommodate it in our thinking.

“One thing this presumably means is that the prominence of household demand in driving the expansion from the mid 1990s to the mid 2000s should not be expected to recur in the next upswing.”

That’s a clear warning that the days of credit for all, 100 per cent home loans, overseas trips on credit and endlessly-rising house prices are gone. We can’t afford them, the economy has to be rebalanced, and if Australians try to afford them, they will have to pay a lot more for the privilege.

We will still have the capacity to spend, but it will cost us more in terms of higher interest rates, whether it’s on credit cards, home loans or any other form of credit. In fact there’s a deeper message here that the recovery will be characterised by much higher rates than we expect.

When Mr Stevens made it clear the RBA is worried about another housing bubble in the not too distant future (that has already received a lot of publicity), his warning should seen as only one of what could be many, if the bank sees consumption as getting out of hand.

And if it seems to the RBA that a repeat of the surge in household consumption is happening, then the implied warning is that the RBA will stop by putting up interest rates: it’s the only weapon it has to limit unwanted developments in the economy.

The Federal Government will have to take tough notice because it has tough decisions of its own, as Prime Minister Rudd warned at the weekend in his 6000-word opus in the Fairfax media.

Government spending will have to be controlled and cut wherever possible (and in some uncomfortable areas) to reduce budget deficits and the national debt, while paying for the reform of the health system and climate change.

On top of thatthere will be the tax changes that could flow from the Henry Review. We may as well get used to the idea that many businesses could pay less tax as exports are encouraged and other ways are found to drive national income.

Even though the GST is not included, what’s the betting that the logic of cutting consumption, raising money for reform and other changes and paying off debt, will come via tax hikes for things like the GST?

Mr Stevens also had a warning about resting on our laurels and ignoring the problem, having dodged the bullet this time.

“The risks associated with those trends going too far are apparent from events in other countries.

“These risks have been reasonably contained so far in Australia — but it would be prudent not to push our luck here,” Stevens said.

And depending on China recovering and maintaining that recovery won’t be enough: the governor also reminded us yesterday of the downside that sits there from hitching ourselves to China. If China fluffs it, or if they have to crimp a credit boom (which is looking likely), then we will be hurt.

And, having dodged the bust that other economies are suffering (in housing and the economy generally), does anyone seriously think the RBA and Mr Stevens will not do what they think is necessary to stop the coming bubble from getting in the way of a steady recovery, and a rebalancing of the economy?

From the Federal Government down to ordinary consumers, we have been warned.

No more magic puddings.