Concern over debt as RBA raises rates
Interest rates are on the rise, again, with the Reserve Bank of Australia announcing today that the official rate will be increased to 6.25%. While the move is aimed at curbing inflation, one economist argues that the bank should be more concerned with Australia’s burgeoning debt levels. The University of Western Sydney’s Steve Keen says while the bank can use interest rates to control inflation, but it has no mechanisms for curbing debt. He says failure to address this problem could see Australia face a recession within the next one to two years, in a similar fate that struck Japan in the 1990s. Associate Professor Keen says that compared with the debt levels in the 1980s of 50% of gross domestic product, today our debt levels represent 140% of GDP.