Forbes magazine and its guest writer, economist Steven Keen, published an article just a few days ago saying Australia will go into recession, most probably by 2017.
The premise of the article is private credit in Australia has been growing in excess of GDP growth and it will drop back in a form of mean reversion, reducing aggregate demand and thus producing a recession.
Perhaps the timing was coincidental but it just so happens private sector credit figures for February have now been released by the RBA. Private sector credit grew by 0.6% in February, up from January’s figure of 0.5% and a tad higher than the 0.5% expected by the market. The year-to-February number was 6.6%, also up from January’s 6.5%.
For those readers interested in the relationship between private sector credit and GDP, a chart showing both over the last three decades is shown below.
