This week prominent British financial writer Niall Ferguson picked another GFC was just around the corner.

His prediction seemed a little over dramatic.

But one of his key reasons for nervousness was grounded in a very real issue facing the global economy as it moves out of the recovery phase from the 2008 crisis.

All across the developed world inflation has been so low for so long that there's a consensus that it is now dead, Pie Funds chief executive Mike Taylor said.


But there was a risk of complacency and there were warnings signs that inflation could resurface next year, he said.

Equity markets have soared to record highs as investors target better returns than they can get in the bank.

If inflation does start to rise and central banks move to lift interest rates quicker than expected then there was real risk of correction on markets, Taylor said.

"It's when you believe that things can't change that they usually do change."

Central banks - from the US Federal Reserve, European Central Bank and New Zealand's own Reserve Bank - have been reluctant to raise rates and are still effectively in "emergency" settings designed to get us through the last GFC.

But globally growth was starting to return to most major economies, Taylor said.

"Just look at the RBNZ, should our interest rates have really been that low given the strength of the economy in the past four years? Arguably not.

"It's good if you own assets because your mortgage is cheap and your shares are going up and the world continues to tick over. But it's probably not good for the end of the cycle."


The risk was that bubbles formed as markets soared into unrealistic territory.

"All asset classes, it's not just equities. It is probably more particular to bonds because they have been suppressed."

But it was affecting everything from Auckland housing to US equities, he said.

Some of the potential triggers for inflation were falling unemployment and the oil market.

The risk was that when inflation turns, it turned fast, Taylor said.

"Interests rates could spike and equities could fall 20 or 25 per cent, that's the real risk that could happen either next year or the year after."