Right now, a key debate over the economy is between the Reserve Bank and the government over just how hot the economy is running. The RBA suggests there is “excess demand” while the treasurer argues the economy does not need any more slowing. The data is clear that the treasurer is correct.

This week the deputy governor of the Reserve Bank announced the RBA is feeling the heat. Andrew Hauser’s speech to the Economic Society of Australia titled “Beware False Prophets” was slightly less subtle than “Stop Picking on Us” but that basically was the gist.

The speech was a response to the criticism after the most recent decision by the RBA to keep rates steady together with its updated estimates of core inflation staying above 3% till the end of 2025. A few commentators suggested the RBA had given up and “its credibility was shot” because it should be raising rates further in order to cause a recession with at least 100,000 Australians likely to lose their jobs, all to get inflation down.

Both the RBA and its critics actually agree the economy has too much “demand” – that there is too much spending, wage growth and investment that is causing prices to rise. They just disagree over what needs to be done.

Here, however, the treasurer, Jim Chalmers, has joined the debate by arguing that actually there is not too much demand in the economy at all.

I (and the data) very much side with the treasurer.

In her press conference last week, Michele Bullock argued that “what we’re dealing with is continued strong demand, particularly for services. And we’re using the tool we have – monetary policy – to operate on the demand side of the economy.”

You can understand why she would be worried about services, which require a lot of labour. The governor would have remembered what happened during the mining boom when there actually was excess demand pushing up prices:

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By the end of 2007 the amount of services that households were buying was 5.6% above what would have been expected before the boom took off.

In such circumstances you could understand the RBA raising interest rates to reduce the ability of households to spend money on services and non-discretionary items (ie the things you can do without), which also took off during the mining boom:

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In essence the RBA is arguing what is happening now is the same as what happened during the mining boom and it needs to respond in the same way – high rates.

Except … the picture is completely different.

The amount of services we are buying in total remains below the pre-pandemic trend, and even though it has recovered it is growing only in line with that trend. And the decade before the pandemic was a period where interest rates were being cut because the RBA was trying to stimulate the economy!

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The same is true for non-discretionary items. There was a bit of a recovery in 2022-23 after the lockdown. But the volume of services we’re buying has not grown at all in the past year-and-a-half:

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And remember, this argument really is about wages. If Australia was overflowing with excess demand, then wage growth would be rising.

But it is not.

This week the latest wage price index figures for the June quarter showed that annual wage growth was steady at 4.1% and that in the June quarter wages rose just 0.8%.

Bear in mind inflation in the June quarter rose 1%.

It takes a fair bit of mental gymnastics and logic deprivation to argue that wages rising slower than inflation is driving inflation.

The situation is even worse when you compare wage growth to the 1.3% rise in the cost of living for employee households, which also takes into account the rise in mortgage repayment (which are not in the CPI figures):

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Yes, the annual wage growth of 4.1% is higher than the 3.8% annual inflation, but that means real wages in the past year rose just 0.23%:

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Show me where the excess demand is on this graph. I’ll wait.

Still waiting …

Why am I waiting? Because there isn’t any excess demand observed through wages growth!

So why again should the RBA be raising rates? What exactly is it reducing?

And it’s not just the wage price index. The latest fortnightly figures for enterprise bargaining agreements show we are about nine months passed the peak:

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Maybe we just have a lot of other non-wage income?

Real household disposable income per capita gives us a good sense of how we are going on this score.

Again, during the mining boom, household incomes rose quickly in real terms (which is why our spending on services and non-discretionary item also rose), but right now we see the opposite – a total collapse:

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So real wages are barely growing, household income is falling, household spending is flat. You would think an economy “running a bit hot” would actually show some signs of heat.

But what about businesses? If the economy was chock full of excess demand you would expect to see non-mining business investment growing solidly.

During the mining boom period, non-mining investment grew at about 10% each year. After the pandemic there was a natural recovery to make up for the lockdowns. But in the most recent figures, annual growth of non-mining investment was just 3.6%. Hardly symptomatic of a hot economy:

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The RBA and its recession-loving critics might like to think the economy needs to be slowed down and that the argument is just over how much it needs to be slowed. But looking at the data shows us very clearly that Chalmers is right to argue the economy is already slow enough.

• Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work