Australia is headed for recession and nothing can be done to stop it, a prominent economist warns.
The mining boom has bred complacency over the past decade and it's now too late to avoid a recession in 2015, says Saxo Bank chief economist Steen Jakobsen.
"It's too late, the wheels are in motion," Jakobsen said.
But recession would create a sense of urgency that could lead to simplification of taxes and regulation, and shift the political agenda away from big miners and banks to small to medium-sized business, he said.
"How you deal with low growth, low inflation and a negative environment is what will define Australia over the next two to three years."
As the mining investment boom had slowed, the only sector to step up and take its place had been housing, which had created a housing bubble, Jakobsen said.
The Reserve Bank now had the difficult task of stimulating the economy while reining in the housing bubble, he said.
Australia had placed too much focus on the housing market, and policies allowing people to invest in property using their superannuation were "very wrong".
"The intention was to create a diversified portfolio but when society becomes so lopsided, as it is in Australia now with dwellings being the biggest growth factor in the economy - you have to think ahead, you cannot continue just to build houses, you need productivity to go with it," Jakobsen said. "If you compare Australia to other countries, that's why it's standing still, because the industries you have are all very low productivity-driven ones."
He points to the sharemarket, which is dominated by financial companies and features a tiny IT sector.
Jakobsen said the key was "education, education, education", turning Australia into a research-based economy and developing the information technology sector.
"I'm very optimistic on Australia, I just think the complacency and the inability to move the agenda forward has been stopping the changes. But I think this crisis point, which I believe comes early in 2015, is going to kickstart a lot of positive processes."
- AAP