Goldman Sachs Warns of Australian Recession in 2014 as Mining Investments Slow Down; Treasurer Wayne Swan Debunks Gloomy Forecast

Goldman Sachs warned on Wednesday that Australia has a 20 per cent chance of going through a recession in 2014 due to the slowdown in mining investments.

It would be the highest risk rate in a post-war period, excluding the global financial crisis in 2008 and other periods of severe economic slowdown, Goldman Sachs economist Tim Toohey said in a report.

He also pointed to weak business and consumer confidence as the other threats to Australia's economic growth which would be on its 22^nd consecutive year not hit by a recession.

However, Treasurer Wayne Swan downplayed the Goldman Sachs forecast and even lashed at media reports on the prediction for being "deeply irresponsible" and "incredibly reckless." He accused Goldman of issuing the forecast for media mileage and hit the newspapers for wrong recession forecasts.

"The consequences of these kind of half-cocked misrepresentations about our economy live on for much longer than the news cycle," Business Spectator quoted Mr Swan who added it was the third recession forecast from Goldman Sachs in the last five years.

"Did these predictions eventuate? Of course not. Was this mentioned in any of today's stories? Of course not," he pointed out.

Mr Toohey added that the first two quarters of 2014 would be the crucial period when the country's gross domestic product could grow below 2 per cent. To avert such a possible slowdown, he said household confidence must be boosted.

The report coincided with the Australian dollar falling to a 33-month low of 93.56 cent and the release of weaker-than-expected housing finance data.

Mr Swan debunked the link by economists of a shift in the resources boom to a recession.

"If you'd told any economist 10 years ago we'd go through a once-in-a-century terms of trade and investment boom and come out with contained inflation and record low interest rates, they'd have laughed," the treasurer said.

"If you told them we'd also get hit with the worst global recession in three generations followed by five years of prolonged uncertainty and come out the other side with an economy 14 per cent bigger and 960,000 more jobs, they would have shown you the door," he added.

Other gloomy outlook that Mr Swan is expected to disagree with is another forecast by economists of Australia's unemployment rate hitting above 6 per cent by the end of 2013, which would be a 10-year high.