Get ready for an Australian recession by 2017

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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. During the life of the next Parliament — and probably by 2017 — Australia will fall into a prolonged recession.

Click here to read the rest of this post, and here to download the Excel file showing the link between a slowdown in the rate of growth of debt and a recession.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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16 Responses to Get ready for an Australian recession by 2017

  1. carson0900 says:

    Steve, do you have a link to the Bank of International Settlements data?

  2. Dinero says:

    The private sector has a stock of savings and so and the spending in a year is not from earning plus borrowing. The spending is from earnings, borrowings and savings.

  3. Steve Keen says:

    Except that one individuals savings means a reduction in another individual’s income. Savings is an illusory concept when applied to macroeconomics: individuals can save (change the amount of money they possess) but economies cannot unless (a) banks create more money–simultaneously creating debt–or (b) the government runs a deficit.

  4. Dinero says:

    The stock of savings , that have accumulated in previous years, is a real quantity that can be used for spending. There can be a stock of savings in the economy as a whole, that can be used for spending.

    For clarity, if there was no earning and no borrowing in a year by the spenders in the economy there can be spending in that year, from the stock of savings.

    So that illustrates that the stock of savings exist as a source of spending.

  5. twowithinthreethatisone says:

    Both increased borrowing and government deficit spending increase costs……(because it goes into the economy as the enterprise of government and which consequently has a flow of additional costs such as depreciation). Thus deficit governmental spending does not resolve the disequillibrated monetary state of the economy. A modern technologically advanced and hence increasingly capital intensive economy is inherently cost inflationary as the increased costs of capital assets must be continually factored into total costs. And even if the economy can limp along for relatively long periods of time without completely collapsing every other business model is dominated by Finance and probably upward of 95% of the entire populace is enslaved by same. Factor in the just getting started disruptive effects of innovation and artificial intelligence eroding aggregate demand…and you’ve got a real problem.

    The only valid economic way to resolve this inherent and increasing problem is to integrate monetary grace as in direct to the individual Gifting into the debt based money system.

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  7. koonyeow says:

    Are there ways to short the Australian market then?

  8. KGKG says:

    Dear Prof Keen

    I am among thousands who thoroughly enjoy and appreciate your non-neoclassical economics and related commentary. The main stream media in-particular in Australia are against unconventional narration!

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  10. nrlsupercoach says:

    Dear Dr Keen,

    Looking at wikipedia page ( and sorting by % of GDP .

    There are plenty of countries with rations higher ( much much higher ) than Australia. Most notable to me is UK with (569%).

    How did these countries accumulate such high debt and why wouldnt Australia keep on accumulating more? In other words which rule says that the Debt ratio has to come down once 200 % is reached?

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  13. mattnewman says:

    Dr Keen
    Is negative gearing an economic tool by which the Australian government continues to incentivise debt and spending. I’m new to Aus having emigrated a year ago and stuck in the quandary of deciding whether to play the negative gear game everyone here is playing.
    It seems completely counter intuitive to be required to take on more debt , to fix a problem of an improved LTV ratio of your portfolio.

    Is negative gearing just rigged economics and when is the music going to stop?

    Matt – Melbourne

  14. Steve Keen says:

    Hi Matt,

    It is counter intuitive, but it’s been wired into the Australian psyche so much over the last 4 decades that Australians seem to think it’s normal. Arrangements like that, along with our dreadful conditions for renters (especially in comparison to Germany) doubly motivate them to take on debt to buy. The two factors are contradictory as well. Negative gearing only works if you (pretend to) rent out your property, but being a renter is so bad people are always trying to buy their own place to live as well. The doubly whammy drives everyone to take on more debt.

  15. Steve Keen says:

    You’re confusing a number of very different measures there. When I’m seeing 150-200% of GDP as a danger level, it’s for domestic non-financial sector debt. That table reflects a country’s role as a financial sector as much as (or more than) its effective indebtedness, and from how it’s defined it may well be the sum of its assets and liabilities. For comparison, check this table which nets out assets and liabilities:

    That doesn’t paint such a flattering picture of the top-ranked countries with negative net assets.

    Countries and Regions Date GDP Date NIIP Date NIIP in % GDP
    Iceland 2014 1,993.336 bil. kr[46] 2014 -7,936.987 bil. kr[47] 2014 ?398.2[48]
    Cyprus 2014 17.506 bil. €[15] 2014 -28.899 bil. €[16] 2014 ?165.1[17]
    Greece 2014 179.081 bil. €[15] 2014 -218.273 bil. €[16] 2014 ?121.9[17]
    Portugal 2014 173.044 bil. €[15] 2014 -193.075 bil. €[16] 2014 ?111.6[17]
    Ireland 2014 185.412 bil. €[15] 2014 -197.878 bil. €[16] 2014 ?106.7[17]
    Spain 2015 1,081.190 bil. €[15] 2015 -978.321 bil. €[16] 2015 ?90.5[17]
    Croatia 2014 328.927 bil. HRK[18] 2014 -291.495 bil. HRK[16] 2014 ?88.6[17]
    Hungary 2014 31,863.969 bil.HUF[18] 2014 -23,929.899 bil.HUF[16] 2014 ?75.0[17]
    Bulgaria 2014 82.164 bil. BGN[18] 2014 -59.429 bil. BGN[16] 2014 ?72.3[17]
    Slovakia 2014 75.215 bil. €[15] 2014 -52.654 bil. €[16] 2014 ?70.0[17]
    Poland 2014 1,728.676 bil. zl[18] 2014 -1,162.792 bil. zl[16] 2014 ?67.4[17]
    New Zealand 2013 237.769 bil. NZ$[44] 2014 -154.592 bil. NZ$[45] 2014 ?65.0
    Latvia 2014 24.060 bil. €[15] 2014 -14.730 bil.€[16] 2014 ?61.2[17]
    Romania 2014 666.637 bil. RON[18] 2014 -382.594 bil. RON[16] 2014 ?57.1[17]
    Australia 2014 1,558.586 bil A$[42] 2014 -866.700 bil. $A[43] 2014 ?55.6

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