A US defence think tank has warned that Australia only has six weeks to prevent a housing market collapse, due to the banks’ crackdown on foreign investor lending.

According to an article written by Washington-based International Strategic Studies Association (ISSA), local bank policy changes could mark a decline in foreign direct investment in the property sector.

“This will profoundly impact the Australian government’s ability to fund major programs in the defence and civil sectors,” it said.

The article further predicted that one of the first major defence casualties would be the Royal Australian Navy’s submarine acquisition program.

“We estimate that Australia has about six weeks or so to turn this situation around, otherwise there would be a massive hit on property valuations and the building trades,” ISSA president Gregory Copley told news.com.au.

“The banks clearly believe Australian real estate values will decline, so they are attempting to avoid that risk… In doing so, they precipitate the market collapse but are less exposed to it.”

However, NAB chief economist Alan Oster described ISSA’s prediction as “garbage”.

“What the banks were trying to do with the tightening of apartment lending, particularly to foreigners, was make sure that if people were having trouble offshore they didn’t end up in the Australian banking system,” he said.

Commonwealth Bank also said that they are not expecting any significant contraction until late 2017 and early 2018.

“CBA estimates of the apartment construction pipeline point to a significant lift in supply that will ultimately weigh on new construction. That point still seems some way off,” a bank spokesman said.