Dire warnings are now starting to emerge over Australia's private debt levels at 210% of GDP. They say recession is coming and house prices will crash. The whole economy has been fueled by cheap money. And what does the Turnbull gov do? Raves on about a gov surplus and wants to keep cutting.
"We have borrowed ourselves so much to the hilt that we are now dependent on that continuing to rise over time and it simply won't," he told the ABC's The Business.
Many believe the Reserve Bank has been a steady guiding hand to the Australian economy in the years since the GFC, but Professor Keen believes it has guided the economy "straight toward the shoals" by encouraging households to borrow with low rates which has led to asset bubbles.
"They don't know what they're doing," he said.
"Our debt level according to the Bank of International Settlements, private debt level, has gone from 150 per cent of GDP to 210 per cent of GDP."
He argued that means a large part of the growth that Australia has enjoyed since the GFC, while many other countries plunged into recession, has been fuelled by a 60 per cent rise in household debt.
"Ireland did the same thing when they called themselves the Celtic Tiger and they don't call themselves that anymore," he said.
"Spain was doing the same thing during its housing bubble and we've replicated the same mistakes. ABC