We seem to be strangely unwilling to confront the realities of our current economic situation.
This precludes informed debate about what to do from here.
Recent GDP figures show that we barely avoided a double dip recession last year.
This is cold comfort for the mounting number of unemployed.
In a nutshell, we spent much of the first decade of this millennium using overseas money to bid up our own house prices.
We are now faced with the stark reality that buying and selling houses can make individuals rich but not a nation.
Trading houses as speculative assets is a zero sum game for an economy.
No new wealth is created in the process.
So now we are left with a stagnant economy, inflated house prices and massive overseas debts.
So let's lay out our current economic situation in simple terms.
Our economy has shrunk in the past three years.
Unemployment has risen to above 6% and is likely to climb further.
The cost of living for the average New Zealander is rising.
This is largely due to the fact that in a globalised world economy we are competing with increasingly affluent Chinese, Indians and others for the basics of life.
This is why we are paying more for petrol, butter, milk, cheese and meat.
So far, no political party has really provided any answers or been prepared to outline this reality.
Labour has expressed a desire to redistribute the current economic pie.
To be fair to the National Government, it has been bogged down in crisis management in recent months.
But before the Christchurch tragedy, the Government was offering little in the way of innovative thinking in the area of economic progress.
Which is why recent reports that the Government is considering public private partnerships for the provision of housing should be greeted with cautious optimism.
The idea is that government and banks could combine to develop large-scale affordable housing projects, as has occurred in Australia.
This approach could have huge potential in the reconstruction of Christchurch.
The ability to cut through red tape, as well as the economies of scale available due to size, could lead to major breakthroughs in the construction of affordable housing.
This approach could then be used in other centres.
In considering the implications of such projects, it is worth examining the role of housing in our economy.
The affordability of housing either through ownership or renting is crucial for our future prosperity.
A nation's economic prosperity is determined by its output of saleable goods and services.
New Zealand's current output per person is about $US25,000 ($NZ33,300) whereas Australia's is $US36,000.
Over the past decade we have deluded ourselves that rising house prices fuelled by easy credit was making us all richer.
It wasn't and now, as house prices stagnate and fall in real terms, we are facing this harsh truth.
A recent IMF report suggests house prices in New Zealand are still 20% overvalued.
This is based on the ratio of current house prices to average household incomes, which is still way out of kilter with historical levels.
So one of two things is likely to happen.
Either house prices will fall in nominal terms or eventually inflation will cause incomes to rise as house prices languish.
This process could take a very long time.
The Christchurch earthquake is likely to delay this process of adjustment.
It has been suggested that up to 10,000 houses may be lost.
As Christchurch residents either relocate or rebuild, this will put upwards pressure on house prices in many areas.
This is why there is an urgent need for innovative ideas for the large-scale construction of affordable houses. Making the supply of houses more responsive to changes in market conditions should be a key strategy for national prosperity.
If housing becomes more affordable, this allows people to save more and invest in productive assets such as businesses, machinery and infrastructure.
Affordable housing is also an attraction for skilled migrants.
It would also help us retain our own best and brightest, who may otherwise head offshore. Any moves by the Government to increase the affordability of housing by increasing the housing stock should be applauded.
It is interesting to note that the Property Investors Association seems against the move.
If the supply of new houses is made more responsive to market conditions this would reduce the likelihood of major capital gains in the future.
The primary purpose of houses should be for people to live in, rather than use as speculative assets.
Any moves to increase the elasticity of supply of houses is a move in the right direction.
Many of the impediments that restrict housing construction in this country work in favour of existing homeowners.
Planning and building consents and the myriad of red tape that has sprung up since the leaky homes debacle needs to be re-examined.
Making housing more affordable removes a major obstacle to future economic prosperity.
Bloated house prices mean many young Kiwis will spend most of their working lives paying off hefty mortgages.
That's assuming they do not head overseas.
Less of their income will be available to save and invest in productive endeavours that benefit the economy.
Peter Lyons teaches economics at Saint Peter's College in Epsom and has written several economics texts.
