It may seem like our economy is doing well at the moment with interest rates at a record low, but it could just be like a giant game of Jenga that’s being built higher and higher and getting increasingly precarious – an eventual collapse is inevitable.

When global banks keep cutting interest rates to pull demand forward from the future, they are trying to prevent economic weakness before it happens. But we’re seeing from other developed markets that this strategy has its limits.

Australia is in good company among other nations who are struggling to gain traction with monetary policy. The RBA’s policy is a perfect example of borrowing from the future: keep rates low to encourage consumers to borrow more and increase consumption now, while the debt to be repaid later piles up.

With the official RBA cash rate at 1.75%, Australia is still in a better position than many developed countries where rates are close to or even below zero. We can afford to make a few more cuts if necessary to keep households spending.

Aussies are taking the bait and continuing to spend, but since the GFC all this rate cutting has driven an increase in house prices, which of course means increased borrowing, and Australian household debt as a percentage of household disposable income is now at a new all-time high.

All of this debt is reliant on future earnings to pay it back, and it’s likely that at some point excess consumption will taper off as people focus more on saving and paying off their debt. That Jenga tower is losing more and more bricks from its steady foundation, and the higher it climbs, the weaker it gets.

You have to hand it to the RBA though; its policy of cutting rates has managed to keep Australia recession-free for 25 years now – a remarkable achievement when you look at the larger global financial picture. The Australian economy has just experienced the largest mining investment and terms of trade boom in its history, and now needs to transition to a point where growth is spread across the wider economy.

It seems like things are moving in the right direction, with the latest update of the NAB’s authoritative business survey reporting a reassuring improvement in both business conditions (up from 8 to 12) and business confidence (up from 3 to 6). You can trust us that those numbers do mean something. A couple of years ago they were both below zero.

The NAB’s chief economist Alan Oster mirrored this positive outlook, saying “the lift in business conditions to these levels not only suggests that Australia is withstanding the uncertainty offshore, but that the recovery in the non-mining sectors of the economy have in fact stepped up a gear this month”.

This all sounds like pretty good news for Australia’s economic future, right?

What makes it especially good is that Australia’s Q4 2015 economic growth rate came predominantly from household final consumption contribution. That’s a direct result of Australians spending more, and the savings rate is now at 7.6% – a new low since the GFC.

But can we continue like this indefinitely or is the tower starting to wobble?

With the ANZ-Roy Morgan weekly consumer confidence index down 3.8% over the past 4 weeks, and the Westpac-Melbourne Institute consumer sentiment index falling 4% in April, households may be more cautious when it comes to dipping into their savings.

This is reflected in the NAB business findings, because while the figures were strong overall, the consumer-facing sectors showed signs of weakness with retail back at the zero line and finance, property and business, together with household services, falling well short of their peaks.

Similarly, New South Wales and Victoria are failing to maintain their recent periods of growth.

None of these things in themselves are threatening the economy, though, in that there’s no sign that we’re on the brink of a collapse. In fact, recent figures from the IMF forecast that Australian growth “is expected to remain below potential at 2.5% in 2016 but to rise above potential to 3% over the next two years, supported in part by a more competitive currency”.

That sounds like a prediction we can cope with. And if anything does happen to make our tower wobble (faltering growth or currency fluctuations, for example), we’ve always got the rate-cutting strategy to fall back on. For now, that is.

But there will surely come a day when the structure we’ve been building just can’t cope any more, and it all comes crashing down in a big mess. The RBA’s strategy, which relies on borrowing from the future – with the side effects of higher housing prices and increased household debt – can only succeed for so long.

In a recent interview, the former PIMCO boss Mohamed El-Erian convincingly made the point that the global strategy of relying on finance for growth pre-GFC failed spectacularly.

Is Australia priming itself to meet the same fate, with its current housing, construction, borrowing, and consumption-based economic transition? As Mr El-Erian put it, perhaps we have fallen “in love with the wrong engine of economic growth”:

“The period up to 2007, 2008 was the unfortunate romance. The notion that financial services could power economic growth, that it was the next level of capitalism, spread across the world. People thought you went from agricultural to industry to manufacturing, and then, if you’re really good, you make it to finance. Phase one will be seen as falling in love with the wrong engine of economic growth.

Perhaps regulators and the market has seen the analogy too.”

In the past year Australia’s banking regulator, APRA, has cracked down on the growth of investment lending, which it previously capped at 10%. The four big Aussie banks are not reporting promising figures, and ratings agency Moody’s says banks are facing increasing problems with investment loans as falling rental yields are causing more borrowers to default.

Moody’s’ assessment of the situation sounded worryingly similar to Hyman Minsky’s definition of a “Ponzi” unit in his influential Financial Instability Hypothesis: “For Ponzi units, the cash flows from operations are not sufficient to fulfill either the repayment of principle or the interest due on outstanding debts by their cash flows from operations,” Minsky wrote.

Compared to Moody’s comment that the decline in rental yields “has increased the level of ‘cashflow’ losses suffered by residential property investors over the past three years and made investors dependent on greater levels of house price appreciation to cover their losses. A greater dependency on house price appreciation makes residential property investing, and in turn, investment loans more risky.”

In both situations you have a big cashflow problem, with people relying more and more on money that they have no guarantee of making, in order to pay for what they borrowed in the past.

Paired with growing evidence that Australia’s apartment price crash is real, the banking industry could be in real trouble.

It seems almost inconceivable that our housing market could collapse or our economy could fall to ruins overnight, but then again, as El-Erian pointed out: “who would have ever thought we’d be living in a world of negative nominal interest rates?”

With Australia’s economy in such a precarious position, so reliant on finance and housing at this time of transition, even the smallest knock to the housing market could be enough to topple it. We’d better hope that the dollar stays low enough that our services and manufacturing industries can take the impact of the blow.

Because the problem is, if and when that cry of “Jenga!” comes, we’re all losers.