Leading article: The Great Rebalancing

After the Great Moderation and the Great Recession comes the Great Rebalancing. Manufacturing and exports are recovering, according to the latest survey compiled by the Chartered Institute for Manufacturing and Supply. Mortgage lending, meanwhile, remains weak, according to the Bank of England.

Taken together, they are a glimpse of the gradual rebalancing of the British economy – towards selling the rest of the world our goods and services, rather than selling each other flats and houses in an economically pointless spiral. Avoiding being trampled by the political elephants fighting over public spending cuts, the nation's companies and households have been quietly getting on with the job of fixing under-competitiveness and over-indebtedness.

Anyone listening to the last few weeks of political debate would be forgiven for concluding that the public finances were the British economy, and vice versa. In fact there are three deficits that need attention: the public finances, most obviously, but also the trade deficit and the savings deficit. All three are symptoms of a nation that has enjoyed living way beyond its means, both in the private and the public spheres. To the extent that the UK economy could produce the growth to fund our standard of living, we relied on the City and a housing bubble. Both are gone now, and the buoyant tax revenues that flowed from them have mostly evaporated. The economic model they represented is broken.

The truth is that to pay for more teachers, more new cars and apparently ever rising house prices, we have relied on borrowing from our own futures; borrowing from abroad; and running down savings and selling off national assets, such as Cadbury. Our future standard of living remains badly at risk from our past profligacy.

So the rebalancing is urgently needed, and has begun. The Bank of England's benign neglect of sterling has seen it shed 25 per cent of its external value since 2007, and that dramatic price advantage is now being taken advantage of by exporters, better to help the nation pay its way in the world. Households now seem determined to pay off the debts accumulated in the partying years, and have stopped, for now, using their homes as cash-point machines. There will be much more of this in the years ahead. The pace and detail of the process will be influenced by who wins the election, but not the fact of it.