Recession? What recession? THIS recession!

We've been here before. It's called 'stagflation'. This time, the Western world, especially, is mired in a much larger public and private debt trap. Direct attempts to reduce debt can make matters worse, as Eurozone unemployment experience is showing.

The EU experience is politically unsustainable. Higher inflation may eventually (again) appeal to governments as a sneaky way of legally 'defaulting' on government debt. Creditors get screwed. Debtors' real burdens are eased.

The more durable and more honest solution is to increase productivity. Australia could do much more in this respect. Gary Banks' 'to do' list is a valuable reference. However, most of this list seems to be off the political agenda, and, in important areas, such as the labour market and product markets like transport and energy, we seem to be going backwards.

Unless this productivity policy failure is reversed quickly, the new year will only get worse, one way or another.