Steve Keen says looming recession means 2016 election would be good one to lose

Steve Keen says looming recession means 2016 election would be good one to lose
Steve Keen says looming recession means 2016 election would be good one to lose

During the life of the next Parliament — and probably by 2017 — Australia will fall into a prolonged recession, according to Steve Keen, the head of the school of economics, history and politics at Kingston University in the UK and author of Debunking Economics.

"For the last 25 years, Australian politicians of both Liberal and Labor hue have been able to brag that, under their stewardship, Australia has avoided a recession.

"Those bragging rights are about to come to an end," he blogged saying the recession has been set up by the sidestep both parties have used to avoid downturns for the past quarter century.

He claimed Australia’s most famous recession sidestep was during the GFC, when it was one of only two countries in the OECD to avoid experiencing two consecutive quarters of negative GDP growth (the other country was South Korea).

"Since then, the private sectors of the advanced countries have collectively de-levered, reducing their debt levels from about 170 to 160 per cent of GDP. Australia, in stark contrast, has levered up.

"Our private debt to GDP ratio is now more than 20 per cent higher than when the GFC began, and more than 50 per cent higher than in the USA (see Figure 1).

Figure 1: Australia has borrowed its way out of recession for the last 25 years

Click to enlarge

Steve Keen says looming recession means 2016 election would be good one to lose

"The day of reckoning can be delayed by encouraging yet more private borrowing, which the RBA can attempt to do by cutting interest rates, and the government can reduce the crunch by running a large budget deficit.

"But these are likely to happen after a crisis rather than before it, because our Reserve Bank and our politicians are as oblivious to the dangers of private debt today as Bernanke was back in 2007.

"The 2016 election could be a good one to lose."

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Tags: 
Recession Election

Comments

Be the first one to comment on this article
What would you like to say about this project?