You would hope by now that the government is ready to face up to reality. I know this might be a rather optimistic anticipation on my part, but surely the treasurer and his predecessor and now prime minister, realise they have a problem with the economy?

One of the more amusing things this week was the government and their conservative cheerleaders trying to suggest ALP backbencher Anne Aly had endangered the economy by asking “what about the fact that our economy is now in a recession, or it looks like it is going into a recession?” while discussing tax cuts on Sky News.

One of the more amusing things this week was seeing the government and their conservative cheerleaders trying to suggest ALP backbencher Anne Aly had endangered the economy by asking “what about the fact that our economy is now in a recession, or it looks like it is going into a recession?” while discussing tax cuts on Sky News.

The Australian in its cute partisan manner described it as a “car crash” interview, and the finance minister Matthias Cormann suggested it was “recklessly irresponsible and wrong and they show that Labor has learned absolutely nothing from the recent election outcome”.

Actually they are neither of those things at all.

As Aly then continued to say in her interview, “it’s very obvious that the economy is not doing as well as the government would have believe. You have figures out of the RBA, you’ve got the interest rate coming down again.”

And it seems the only ones who do not find that obvious are the members of the government – mostly because they spent the entirety of the election campaign lying about the strength of the economy’s fundamentals.

This week the yield (or interest rate) for Australian government two-year and three-year bonds went below 1% for the first time in history. Seven months ago the rate the government was borrowing money for two years was 2%. It has taken less than seven months for that to halve.

The gap between the five years and the two-year bond yields is as small as it has been since the GFC. Essentially the market is seeing very little extra return from borrowing for five years as opposed to two years because they see very little chance that things are going to get better in that time.

That does not happen when things are strong. That doesn’t even happen when things are just OK. It happens when things are bad.

At the start of December last year the general expectation was that interest rates would stay flat for this year and then start going up next year. Now not only have rates been cut, it will be shocking if there is not another two cuts before the end of the year, and a 50/50 chance of a cut to 0.5% by this time next year.

A cash rate of half a per cent. That would translate to mortgage rates lower than any recorded since the second world war.

The Reserve Bank is not doing that because the economy is abounding in sunshine and rainbows.

The head of the Reserve Bank, Philip Lowe, gave a speech on Thursday in which he made it very clear how things were going.

He noted that the decision earlier this month to cut the cash rate to 1.25% “will support the economy through its effect on the exchange rate, lowering the cost of finance and boosting disposable incomes. In turn, this will support employment growth and inflation consistent with the target”.

“However,” he continued (and it really is as big a “however” as central bankers ever say), it would “be unrealistic to expect that lowering interest rates by a quarter of a percentage point will materially shift the path we look to be on”.

In other words, the rate cut will not do much; the Reserve Bank will need to cut rates even more. Then he concluded in what might be a central banker’s version of a scream. And the scream was directed at the federal government.

He said: “It is important though to recognise that monetary policy is not the only option, and there are limitations to what can be achieved.”

This is him saying in big bold letters that the government should not just hope that even more cuts to interest rates will change things.

Just in case the treasurer was not paying attention the governor continued his scream at the government.

He finished by saying “as a country we should also be looking at other ways to get closer to full employment. One option is fiscal policy, including through spending on infrastructure. Another is structural policies that support firms expanding, investing, innovating and employing people”.

The governor of the Reserve Bank does not use a term like recession in his speech. His words (unlike those of a opposite backbencher on a barely watched pay TV station) can move markets.

But his words are clear. The economic path we look to be on is not good. The Reserve Bank can do what it can to shift the economy on to a smoother road, but it needs help – a lot of help. Infrastructure spending, and policy work – something this government, which went to an election with basically only a policy of tax cuts that favour the wealthy, is not all that good at doing.

They can start by dropping the faux outrage at people telling them the economy is going downhill and start acknowledging they have a problem that needs fixing.

• Greg Jericho is a columnist for Guardian Australia