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Australian Treasurer Peter Costello fears a global recession may be imminent, driven by America's subprime mortgage meltdown and China's unsustainable economic growth.
Costello told an Australian newspaper he suspected his countrymen had forgotten that recessions every decade or so were a "normal" state of affairs.
"It is almost as if people have become so used to growth that they think a recession can't happen in this country. I don't believe that the business cycle is defeated. At some point the business cycle will turn down, no doubt about it," Costello told the Sydney Morning Herald.
"We don't want people to think that recessions have been abolished in this country."
His remarks came as the Reserve Bank of Australia considers whether to increase interest rates just weeks before next month's Australian federal election, a likely devastating blow to the Liberal government's hopes of re-election.
Costello predicted the volatile Chinese economy, which has been enjoying annual growth rates of nearly 12 percent, was set to unleash greater instability on world financial markets.
"China is very strong but you can't just grow an economy in double figures on a long-term basis.
"All flows of capital they have been sending to the US might reverse, and you will get a major realignment on major currency markets.
"That will be a wild ride when that happens, " he said. "That will set off a huge tsunami that will go through world financial markets."
-NZ Herald staff
