Australia is headed towards recession, according to former Greek finance minister Yanis Varoufakis, who argues that weak domestic investment and the slowdown in China will ultimately put the brakes on growth.
Speaking to Fairfax Media on Monday, the one-time Sydney University economics lecturer said China was crucial to Australia's fortunes, but the world's second-biggest economy was "not at the stage of development where it can continue to defy the global deflationary atmosphere".
"There will be a recession in Australia, because of the collapse of investment and because of the collapse of animal spirits - and this is because of what's happening in China," he said. 
In that scenario, a short, sharp shock would be preferable to the entrenched, or secular, low or zero growth pattern that has taken hold in countries such as Japan.
Europe, too, is currently battling deflationary pressures, low growth, and negative real interest rates.
"The recession itself would not be the problem," he said, "because some recessions are necessary.
"Some recessions are a bit like bush fires that clear out the forest, and help with the regeneration.
"The fear would be that this is something more secular, something more like stagnation, and a systemic crisis.
"I'm not saying that is going to happen, but if I were a politician here, this is what I would be worried about."
He said after nearly 25 years without recession, Australia was caught up in the same global pattern of weak aggregate demand and excessive corporate savings, which are being handed back to shareholders via buybacks and dividends instead of being re-invested in additional capacity or productivity enhancement.
China, which was driving global demand for resources, energy and capital equipment until last year, thought its role was "temporary", he said, but the rest of the world had been slow to recover from the global financial crisis.
Australia's transition from resource-related investment to a more balanced growth model was also taking more time than expected, he said.
"There has been a significant reduction in investment in things that maybe were over-invested anyway, like mining, but there hasn't been a transfer of that investment into other sectors, especially that of the innovation that [Prime Minister] Malcolm Turnbull is so keen on," said Varoufakis???, who led Greece's debt negotiations earlier this year before falling out with Prime Minister Alexis Tsipras.
He said finding the right model to finance and then commercialise research and development was "not easy", but the government had a role in channelling both private and public funds into areas that would ultimately add to growth.
Varoufakis' comments come just days after the Australian Bureau of Statistics reported a surprisingly sharp contraction in third-quarter business investment, some of which will feed into the national accounts released this Wednesday.
The ABS said last Thursday that total new capital expenditure for the three months to the end of   September came in at $31.4 billion, down 9.2 per cent on the   June quarter and 20 per cent on the same time last year. This follows a revised-down 4.4 per cent contraction in the   June quarter.
The latest shrinkage of business spending was led by buildings and structures, down 9.8 per cent, followed by equipment, plant and machinery, where investment dropped 8.2 per cent over the three months. Mining was down more than 10 per cent, but manufacturing was up nearly 7 per cent, helped by the weakness of the Australian dollar.
Investment in "other selected industries" dropped 10 per cent.
Other GDP components are, however, expected to offset this weakness, and quarterly growth is widely seen coming in at about 0.7 per cent, which equates to 2.3 per cent for the year. Companies' operating profits and inventories, published on Monday, were better than expected, and economists also see the contribution from exports to be stronger than in the second quarter.