Will Australia Go Into Recession in 2015

While the world economy in 2015 seems to be pretty stable, at least at first sight, it appears that one of the biggest growing economies of recent years is due for some trouble. Several renowned economists have forecasted that Australia shall undergo a recession that will severely change the way the country views its industrial, mining and educational future.

Steen Jakobsen, chief economist at Saxo Bank warns that Australia will go into recession in 2015 and there is apparently nothing anyone can do about it. Jakobsen argued that due to the falling commodity prices, the end of mining investments and the slowing down of the Chinese economy, Australia will be dragged into an economic recession next year. He added that while there is nothing to stop the recession, the way the Australian government will be able to deal with the negative environment, low growth and low inflation is what will define the next two to five years.

Jakobsen argues that after the decrease of investments in the mining field which was one of the major reasons for Australia’s economic growth, the only thing to replace it was the housing market. This has led to a housing bubble similar to that in the United States and the Australian Reserve Bank has now got to deal with stimulating economic growth while also trying to keep an eye on the housing market.

Jakobsen also predicted that the Reserve Bank of Australia will have to cut interest rates to 2 percent and that depending on the way the housing bubble is handled that figure can even go to 1.5 percent. More importantly the economist noted, the RBA will have to change the regulations when it comes to lending in order to avoid a financial disaster similar to that of the United States back in 2008.

Regarding a more diversified economy in the future, one that doesn’t rely as heavily on the housing market and on mining, Mr. Jakobsen said that the key is education. While it might take time, it is the only guaranteed way of turning Australia’s low-productivity economy into a research based one that focuses on its information technology sector.

Steen Jakobsen says that the recession might be a good thing for the country in the long run as it will trigger reforms in financial policy, in education and with the new free-trade agreement with China, Australia’s biggest export destination, the future isn’t all that gloomy.

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