Please form a queue for the therapist's couch

So far this week, various surveys have revealed our business leaders are depressed while consumers appear deliriously happy.

Both surveys, conducted by opposing banks, come as the federal government has raised its forecasts for commodity prices - neatly shoring up a hole in its budget forecasts just in time for an election - as reports from China suggest that country's appetite for resources is cooling.

Almost everyone claims to be "cautiously optimistic", a contradictory term if ever there was one. Meanwhile, global stockmarkets have bounced off their lows as investors shrug off gloomy projections of a long-term economic slump.

Rarely have there been so many conflicting signals for the future, with sentiment delicately poised on an emotional see-saw.

That in itself throws a rather large earthmover full of salt on the projections released yesterday by the Treasurer.

The very fact they were updated just two months after the budget forecasts indicates the speed with which market dynamics and sentiment can change and the futility of relying on them in any significant measure as signposts for the medium to longer term.

According to the National Australia Bank survey earlier this week, business confidence is at its lowest ebb in a year.

Admittedly, the slump in confidence - brought on by collapsing global stockmarkets in May and June - seems to have steadied. But it reflected the nature of the two-speed economy as the relative optimism among the miners (conducted before the resolution to the resources rent tax fight) slightly overshadowed the general gloom from the retail and manufacturing sectors, which are faced with declining stimulus spending and higher interest rates.

Those rate rises, meanwhile, appear not to have dented the enthusiasm of consumers, at least not according to the Westpac Melbourne Institute survey.

For the 13th consecutive month, consumers have embraced the raft of surprisingly positive economic statistics emanating from Canberra - largely because they remained in gainful employment.

It began with relief that nowhere near as many people were thrown out of work during the recession we never had. And it has continued as employment growth confounded even the most optimistic of forecasters during the past year, culminating in figures showing a spurt in new jobs in mining even as the resources giants were threatening to leave the country.

There is nothing more debilitating to the economic psyche than long queues of jobless workers and the prospect of creating a new class of long-term unemployed. Avoiding that phenomenon has placed Australia in a far better position to quickly capitalise on an economic rebound and accounts for the generally positive demeanour of local consumers.

That flood of optimism hasn't flowed through to the small business sector, unfortunately. For in addition to the recent round of six interest rate hikes, smaller operators have been squeezed dry by the major banks.

With political attention focused almost exclusively on variable mortgage rates, Australia's biggest banks instead have concentrated on fixed loan mortgages and loans to small business to bump up margins. Not surprisingly, loan growth to the sector has all but stalled.

The banks themselves have adopted a harder line towards delinquent debts among the owner-operated and unlisted businesses, now they have mostly accounted for the bad debts among their larger corporate clients.

And given there is a dearth of choice when it comes to institutions supplying finance, small and medium businesses have found themselves over a barrel.

And what of interest rates? In recent months there have been six rises. Should inflation figures be out of the Reserve Bank's comfort zone in a fortnight, we could well see the Reserve Bank push them higher again, at the start of an election campaign.

With unemployment so low, inflationary pressure is likely to build within the economy. At least yesterday's updated forecasts acknowledged that possibility, with projected inflation rising to a more realistic 2.75 per cent this financial year from 2.5 per cent in the budget forecasts.

But in following years, out till 2014, inflation is expected to slip back to 2.5 per cent.

At the moment, there is virtually no consensus on where global inflation or interest rates are headed. Some economists are warning of the dangers of inflation, others of deflation.

Some claim stagnant growth in the developed world will limit inflation and put a cap on interest rates. Others argue massive government debt refinancing will soak up liquidity and squeeze liquidity supplies.

One factor that has not been widely analysed, however, is the effect China's maturing economy will have on global inflation.

While Western governments like to take the credit for breaking the back of the inflationary curse of the 1980s through tight monetary policy in the early 90s, it was China through its exports of cheap goods to the world that contributed the most.

But after 20 years, that phase of China's development is drawing to a close as it evolves from an export economy to a domestic consumer economy. Chinese workers are demanding wage rises of more than 10 per cent and its manufactures are shifting from cheap mass-produced goods to more sophisticated exports.

So what's the prognosis? Years of wild mood swings. Better book yourself in for some long-term therapy.