Australia is facing a one-in-three risk of a home-grown recession next year, according to one of the world's leading financial market strategists.

Minack Advisors principal Gerard Minack said the shambolic state of the domestic energy market has heightened the risk that Australia's extended run of economic growth would come to an end.

Mr Minack - formerly a global strategist with Wall Street giant Morgan Stanley - famously forecast the 2008 debt-fuelled GFC, well before sub-prime lending and collateralised debt obligations became bywords for financial chaos and ruin.

Australia last experienced a recession - defined by two consecutive quarters of falling GDP - in the first half of 1991.

That was the tail end of a string of negative quarters in the so-called "recession we had to have", where debt-laden businesses crumbled, bankruptcies mounted-up and unemployment soared well above 10 per cent.

Mr Minack said the recent housing boom might have saved Australia from a mining bust, but it was not clear what would support growth if housing stalls, let alone keels over.

"The (mining) bust didn't cause a recession; demand elsewhere lifted, boosted by a weaker Australian dollar, an easing of fiscal policy, and lower rates boosting housing activity," Mr Minack said.

"It is fairly clear that housing's contribution to growth will fade in 2018 - indeed, even with a soft landing it is likely to drag on growth."

Business investment will be harmed by soaring energy costs

A key problem is that non-mining investment does not look like filling the breach.

Successive Australian Bureau of Statistics releases show business investment has been in an abject state, pretty well since the resources boom started unwinding in mid-2014.

The forward-looking segments of the ABS surveys have been mixed at best and give little indication of growth coming down the pipeline.

"The prospect of stronger investment spending will fade, in my view, if the domestic energy debacle continues," Mr Minack said.

At the heart of this is Australia's historic advantage in energy pricing has disappeared.

Booming LNG exports may have contributed to lower global gas prices, but they have driven up domestic prices.

As Mr Minack pointed out, gas-fired generation also typically sets the marginal cost of electricity generation.

Futures contract prices for base-load power in eastern states have more than trebled since 2015, pointing to serious trouble ahead, particularly in Australia's industrial heartland.

"Uncertainty about medium-term energy pricing will presumably reduce the prospect of stronger investment spending in any industry where energy is a significant cost," Mr Minack said.

"If non-mining investment weakens at the same time as housing, there is a material risk of recession in 2018."