Australia is one of seven countries that Forbes magazine says is the "most likely to suffer a debt crisis" within the next three years. 
China, whose economy has faltered in the past two years, comes No. 1 on the list of seven, but Australia is No. 2. Sweden, Hong Kong, South Korea, Canada and Norway complete the list of infamy. 
Using data for both private and public debt compiled by Switzerland-based Bank of International Settlements, the magazine looks at the rate of growth of credit compared with gross domestic product, paying particular attention to when credit growth begins to fall.
A graph of the United States shows that lines tracing GDP and GDP plus credit growth cross in 2009, coinciding with the sub-prime mortgage crisis and the financial crisis.
"The bottom line is that private sector expenditure in an economy can be measured as the sum of GDP plus the change in credit, and crises occur when (a) the ratio of private debt to GDP is large; (b) growing quickly compared to GDP," the magazine says.
When credit growth slips as servicing debt exhausts funds available to finance it, "new borrowers baulk at entry costs to house purchases, and numerous euphoric and Ponzi-based debt-financed schemes fail" leading to a change in available credit.
Australia, like the other six countries on the list, fill the two key prerequisites, a high level of private debt to GDP, and a rapid growth of that ratio in the last few years, the report says.
Economic crises often coincide with private debt exceeding 1.5 times GDP and the level of private debt grows by about 20 per cent over a five-year period.
All seven countries have a private debt-to-GDP ratio exceeding 175 per cent of GDP and the increase in private debt in the last year exceeded 10 per cent of GDP.
"Timing precisely when these countries will have their recessions is not possible, because it depends on when the private sector's willingness to borrow from the banks???and the banking sector's willingness to lend???stops," the report says.
While in the past, government policy, such as the massive fiscal injection initiated by former Prime Minister Kevin Rudd's government in 2008, can avert a crisis, the day "when credit growth stops" can't be put off "indefinitely" and those candidates on the list would then "join the world's long list of walking wounded economies," the magazine says.