Bank of America Merrill Lynch analyst Saul Eslake says the Australian economy has a 25 per cent chance of going into recession and warns the nation may have to follow the lead of other countries by effectively printing money, The Australian Financial Review reports.
According to the newspaper, Mr Eslake believes Australia's politicians and policy makers may have "depleted their options" to avoid a downturn.
"Government finances aren’t as strong as they once were ... and interest rates are already low by historical standards," Mr Eslake said.
"We expect the RBA to cut further – to as low as 1 per cent in the event of a recession – and it may need to undertake a ‘Down Under QE (quantitative easing)."
The AFR reports Merrill Lynch puts the odds of Australia slipping into recession in the second half of 2015 at 25 per cent, while it expects gross domestic product to rise one per cent in 2015, and shrink 0.1 per cent in the year following.