Australia facing debt-driven Depression!
SYDNEY, Australia - February 3, 2009 - The world is facing a "full-blown depression" and Australia needs to drastically rethink its attitude to debt if it is to climb out of its current economic trap, says leading economist Steve Keen.
Dr. Keen, an Associate Professor from the University of Western Sydney, says Australia is facing years of weak economic growth because of high debt levels.
"The scale of what we're in for is driven by the level of private debt that's been built up in a speculative bubble that in Australia has been going up for 45 years and in America for 65," he said.
"We've got to the stage where we literally have twice as much debt as we had prior to the Great Depression compared to incomes. That's what caused the Great Depression and that's what's going to cause this one.”
Dr. Keen predicts Australia will have double-digit unemployment figures by 2010.
"It's certainly approaching ... in terms of unemployment levels of 7, 8, 9 per cent. Certainly I think double-digit unemployment next year and getting worse and staying there for some substantial period," he said.
Dr. Keen says Australia's economic outlook will not improve until the Government "shifts direction" and recognizes the current financial crisis was caused by far too much money being loaned irresponsibly.
"The problem is you've got to cancel that debt either by abolishing it formally or by trying to refloat the economy and cause inflation and reduce the debt burden, but we're still at least a year or two away before that realization will sink in," he said.
"Japan is still in a recession/depression 18 years after it fell in a similar trap to us, with far too much debt being used for speculative lending, particularly on real estate and shares in Tokyo.
"Until we realize the debt should never have been issued in the first place and then go about resetting, and frankly a Biblical way, the old classical way of abolishing debt, we're going to be stuck in this trap.
"For Australia, even so, we've lost our manufacturing base, we've got to rebuild manufacturing to have the income that will generate sustainable demand in the future."
