An Australian academic says that country is heading for another recession later this year, or early in 2007, if private debt there continues to grow.
University of Western Sydney associate professor of economics and finance, Steve Keen, says household debt is growing at an unsustainable level and will not be helped by yesterday's interest rate rise.
Professor Keen says Australian households are now spending more just to cover interest on home loans.
"So in effect, one dollar out of every six that a household has to dispose of has now to be paid simply to pay the interest payments on mortgages," he said.
He says two years after Sydney's housing bubble burst, mortgage debt is rising faster than gross domestic product and household incomes, and any correction could hurt the economy.
"When that correction occurs, down goes general spending and we have a recession, so on that basis I'd say the end of 2006, the beginning of 2007 we should see a downturn," he said.
- RADIO AUSTRALIA
Australia headed for recession, warns academic
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