Damien
This is really really simple!
If you save, the Government then taxes the interest on your savings. Some fools refer to this as "Unearned income".
If you lend money then the Government mostly gives you a tax break on what it costs you to lend.
Get the picture?
You work for a bank so you work out what we have to do to value saving before spending.

The answer may be to adopt a floating interest rate, similar to the currency rate.

Then when lots of people want to get debt, the interst rates will rise, taking away some of the demand.

Simple, low cost to administer, real time.

The heart of the problem is in central banks artificially setting the price of money. No amount of tinkering with how you measure CPI will get to the core of the problem.

THe unfortunate part is that this will be a market based approach to the solution, and will not be flavour of the month due to the cries of "market failure"!!

Most people believe that the RBA is able to evaluate all the implications of the economy and produce the "right" interest rate. They have never been able to do this and as the complexity of modern life has increased their ability to even come close diminishes.
The "debt party" was brought about by the low interest rates that the RBA set.
The answer is to get rid of the RBA and let the market set rates. Though much maligned, the market works if governments can be made to keep their hands off.

RobertG ,the low interest rates happened because the Labor Govt of 1990 gave us a servere recession,thus rates had to be lowered to get the economy started again.Interest rates should have been higher back in 2002 to curb the current excesses.This is why the Howard Govt belatedly gave more autonomy to the RBA.Now we must suffer another purge of a recession to stem our excesses.The flow of money needs to be regulated by an independant body.We need the RBA.Imagine if the banks were able to set their own rates.The answers are never simple.

We are not in as bad a situation as the rest of the world.Don't forget we have Govt excesses and waste adding to inflation.Just look at the basket case in point,NSW.

As far as I can see, the problem is simple. An alliance between the big end of town (who are borrowers) and the political left (who hate people with money) has meant that there is an enormous bias in the financial system against saving, and in favour of borrowing. The proof of this is that after 60 years of the current system, we have an enormous foreign debt, whereas ideally we should be even stevens with the outside world.

The solution is just as simple. Only real interest (interest after inflation is deducted) should be taxed, and only real interest payments should be deductible. However anyone thinking this will happen any decade soon must have been watching the pigs flying over the moon.

Unfortunately, the result will be massive pain and suffering when our foreign debt is called in. Remember, however, that we only think in the short term, because in the long run we are dead.

True Plerdsus,but just look at Japan who borrow very little,they have had low growth for a decade.They are look like going into recession too.It is a matter of getting the blance right.The Japanese have low growth and borrowings while we have the reverse.Perhaps we have to find a median path.Give people incentive to save,then we can buy back our country bit by bit.

Solution?Small Govt,less regulation and reduce the number of people on Social Security.Right now,we are doing the exact opposite.
Labor,Labor everywhere,buying their wealth in the shade of our weakness and ignorance.

$1.1 trillion economy.Every working person should be earning an average of $200,000.00 +pa.Where is all the wealth going?