Household consumption is growing at a level normally associated with a major downturn. Wages are barely moving while retailers cannot entice spending out of heavily indebted consumers who are finding the value of their homes falling.

The fall in house prices means dwelling construction - which helped drive the economy over the past three years - is detracting from growth,with 50,000 construction workers losing their jobs over the past year.

Ernst&Young chief economist Jo Young said the key issue was the performance of Australian households.

She said the boost in tax refunds that would start flowing to about 10 million people from next month,the 3 per cent increase in the minimum wage and the cut in official interest rates should put more money into the pockets of shoppers.

They are definite positives that could help keep the economy growing.

But a lift in unemployment,or consumers who use their extra cash to pay off debts rather than spend it,or even a stronger Australian dollar threaten to undermine this expected stimulus.

"If you don't get this working through the household channel,then you've got to start asking yourself what's going to work,"she said.

While there are negatives,there are also signs of strength in some parts of the economy.

The most obvious is the jobs market,with almost 323,000 jobs created in the past 12 months. Of those,more than three-quarters were full-time.

One of the reasons given by the RBA for its decision to cut rates is that it wants unemployment to fall much further to drive up wages.

The RBA sees the United States (3.6 per cent),Britain (3.8 per cent),Japan (2.5 per cent) and New Zealand (4.2 per cent) with lower unemployment rates and believes Australia (5.2 per cent) can do better.

It's also worried that Australia's underutilisation rate - the proportion of people who want to work more hours - is growing. This suggests there is plenty of spare capacity in the economy.

Another positive is the export sector.

The soaring price of iron ore is delivering a windfall gain to the mining sector. In the 12 months to April,the nation set a record trade surplus of $37.7 billion.

But the increase in the value of our exports does not necessarily translate into a stronger overall economy.

The federal government is using the better revenue from mining companies to repair the budget rather than pumping it back into the pockets of consumers as former prime minister John Howard and then treasurer Peter Costello did during the pre-GFC mining boom.

The year started with both the RBA and the federal government upbeat about the economy's fortunes.

Half way in,the story is changing rapidly,with all now hinging on the nation's consumers to turn it around.