“30pc chance” US will fall into recession; Australia at risk of housing slump, economists warn
Posted by gmarkets on 3 September, 2007
The Economist Intelligence Unit released a 42-page report on the effects of the US sub-prime mortgage sector, and said there was a 30 per cent chance the US would fall into a recession, reported The Australian (3/9/2007, p.30). Aus implications: The possibility of a recession had also been mooted by several US economists, with Harvard University’s Martin Feldstein yesterday calling on the US Federal Reserve to cut interest rates to avoid a downturn. The report also predicte Australia as one of the three countries at the highest risk of following the US into a housing slump and said “private equity’s heyday” was over.
Darker scenario on horizon: “Should the US enter recession, another darker scenario rises – the corrective action fails and severe economic repercussions cascade from the US into the world economy with devastating effect,” said the report, titled ‘Heading for the Rocks: Will Financial Turmoil Sink the World Economy?’.
The Australian, 3/9/2007, p. 30