When was the australian gfc

During this time, the Australian share market was performing well and some households were taking advantage of low interest rates to borrow to invest in the share market. One of the most significant initial impacts of the GFC was a decline in the value of share markets around the world including the Australian Stock Exchange. Households left the share market and moved to less risky assets such as deposits.

Also driving the significant increase in household deposit assets was the national general government economic stimulus payments during the GFC. Graph 8 shows the switch to deposits since the GFC has held despite the low interest rate environment, mainly due to banks providing competitive deposit interest rates to households to obtain these less risky source of bank funding for their loan books; and also due to mortgage offset accounts which have become a popular means for householders to decrease their mortgage interest payments.

Graph 9 shows the household wealth effect produced by asset price changes adjusted for inflation. Prior to the GFC, households increase in net worth from holding gains was mainly due to real holding gains from residential land and dwelling assets, which was the most significant asset class held by the household sector Graph 7. During the GFC, Graph 9 shows significant real holding losses from both non-financial and financial assets; however the financial assets recorded real holding losses one quarter before the non-financial assets, in December quarter Graph 9 illustrates the quick rebound after the GFC in real holding gains for both non-financial and financial assets, but also a small period of holding losses in mid to late Since then there have been robust total real holding gains and some real holding losses in the most recent quarters from residential land and dwelling assets.

The housing debt to residential land and dwellings ratio shows the extent to which household residential land and dwelling assets are geared i. An increase in the ratio indicates that mortgage debt grew faster than the growth in value of the residential land and dwelling asset.

Graph 10 shows the ratio in September quarter was The peak in March quarter reflects a sharp decline in the value of residential land and dwellings during the GFC, while the fall in March quarter reflects the fairly rapid recovery in the housing market a year later.

Since March , the ratio has increased, peaking at In the four years up to September quarter , the ratio gradually declined reflecting: significant growth in the value of housing; tightening lending standards and limits on the growth in investor housing loans; and the use of banking products such as offset accounts to minimise housing interest payments. In the last few quarters up to September the ratio has been trending up, this has been mainly due to recent declines in house prices, especially in Sydney and Melbourne.

The housing debt to income ratio has increased throughout the last 20 years, from The ratio indicates that housing debt was Graph 11 shows faster growth in the ratio in mid s when housing debt grew faster than gross disposable income.

Australian households in general took out larger and more flexible housing loans. Just before the GFC, as disposable income grew the ratio flattened. During the GFC, housing debt and gross disposable income growth both fell and the ratio stayed flat. For the last four years, with lower interest rates and slower growth in disposable income, housing debt has grown faster than disposable income and the ratio increased This article has highlighted some significant changes in behaviour for each sector before, during and after the GFC, shown through finance and wealth data in this release.

Search ABS. Breadcrumb Home Statistics Research A decade before and after the global financial crisis: Sectoral analysis. Economics and politics would never be played the same again.

That night in the cabinet room, Mr Tanner recalled, it dawned on everyone just how inextricably linked the world had become and the extent to which Australia was hostage to global forces. The cost to Australia was considerable", he mused. Lindsay Tanner explains that he, treasurer Wayne Swan and prime minister Rudd had decided they had to act with some speed to inoculate the Australian financial system from the worst of the panic that had already spread to other parts of the world.

Mr Swan said the quick decision to guarantee bank deposits and assist institutions to raise money was essential to avoid an Australian Lehman moment. There had been an expectation with Bear Stearns that the Americans would intervene and protect Lehman Brothers. When they didn't, what we saw was basically the banking system in that country imploded.

Australia was among just four developed countries that avoided a recession in along with Israel, Poland and South Korea. A decade after British and US banks began to crumble under the weight of bad mortgages, argument still rages as to whether the mining boom could have carried Australia through without the need for the government's stimulus measures and attendant debt.

Mr Rudd rejects the government spent too much and compares the situation here to what was experienced overseas.

Mr Tanner disagrees with Mr Swan, who last year said Australia's economic resilience had "nothing to do with the mining boom". Mr Tanner does credit his government's decisive actions with keeping Australians in their jobs. He insists it is no accident that the unemployment rate hovered around a narrow band of 5 to 5. This was in stark contrast to countries such as Greece, Spain and Italy that were hit hardest by the panic on global financial markets, and have struggled to recover under the burden of unemployment rates that are still 21 per cent, 16 per cent and 11 per cent respectively.

The former treasurer agrees that history has cast a positive light on the government's stimulus program. Many analysts are worried that Australia survived the global financial crisis by going on its own household and public debt binge. The industry experienced a sharp decline in exports and fall in local demand for vehicles as businesses and households limited spending.

In response the Government introduced a business tax break, as well as other stimulus measures to stabilise the local car market. The fall in the value of total merchandise trade cut 0. While trade between Australia and its major trading partners fell considerably, trade between Australia and China, increased by Exports to China accounted for Driven by demand for resources and energy, the growth of exports far outstripped the growth in imports into Australia. China is in the course of urbanisation and rapid infrastructure reconstruction and its demand for energy and minerals, especially for these products from Australia, expanded in Thus, to prepare for the possibility that the global financial crisis might be deeper and longer lasting than expected, the Government started planning to bring forward the commencement of large-scale infrastructure projects.

Through November and December, interest rates were cut aggressively and the global response to the crisis intensified. Prime Minister Kevin Rudd attended the first G Leaders summit on the 15 th of November and spoke of the potential for the financial crisis to affect the real economy and most importantly, unemployment. Not long after the October stimulus package, the Australian Government had begun planning for the possibility that the unemployment rate might rise dramatically should the economy slow.

In the recessions of the early s and s, the unemployment rate rose quickly. After peaking at over 10 per cent, the unemployment rate took around 10 years to fall below 6 per cent after the s recession and around 6 years after the s recession [see Kennedy for a discussion of unemployment in Australia].

Given that the likelihood of recession was increasing, the Government wanted to be ready to respond with policies to support the work force that went beyond support for aggregate demand. In late , another important factor was working in Australia's favour and that was a depreciating Australian dollar. The floating of the Australian dollar in has turned out to be one of the most important economic reforms in Australia's history.

It has worked as an effective automatic stabiliser, curtailing demand in the good times and supporting in bad. And it has been especially beneficial for the Australian economy because of the relative importance of mineral production. With the potential for commodity mineral prices to rise and fall dramatically, movements in the exchange rate have helped to buffer the effects of these price swings on the broader economy. Through December and January , it became clear that global conditions were much worse than initially envisaged.

By late January, it was also becoming clear that the global economy had experienced a very weak December quarter. Something that wasn't clear in January was just how synchronised the global downturn would be.

Around 75 per cent of countries are now expected to contract in — a remarkable outcome and one that has not been seen for over 50 years. As has been noted by the IMF, financial crises and global recessions with high degrees of synchronisation are associated with long and deep recessions and weak recoveries. By mid-January, it was clear to the Government that further discretionary fiscal policy would be required to support the Australian economy.

In late January, the Strategic Policy Budget Committee ministers finalised a package that work had effectively begun on not long after the delivery of the first package. In constructing this second stimulus package, it was clear that further support for consumption would be required. Despite the considerable planning that had gone into constructing a fast-acting infrastructure program, further consumption measures would still support the economy more quickly than even a fast-acting infrastructure package.

And it was important, given the size of global recession, that the Government provide additional stimulus to keep the economy as strong as possible before the effects of the infrastructure program could make their way through the economy.

Nevertheless, the benefits of the consumption aspects of the Government's stimulus packages have been vigorously debated in Australia. There is now strong evidence that these aspects of the stimulus package provided substantial support to the economy. In the month of April , Australian retail trade turnover was 4.

In contrast, in Japan, the US, Canada and Germany where stimulus packages were not targeted at consumption in this period, retail trade was 2 to 3 per cent lower over the same period.

And off the back of GDP growth in the March quarter, consumer confidence has rebounded after hitting long-term lows, to be now 22 per cent above its October level.

However, perhaps the strongest evidence of the positive effects of consumption-based stimulus measures is the empirical analysis that has been undertaken in the US. Often when people see consumption fall or saving rise in a period in which the Government has provided additional income through tax rebates or welfare bonus payments, they are inclined to conclude the stimulus was ineffective. Of course, to conclude that the policy was ineffective we need to know what the world would have been without the policy, something we don't know when just examining aggregate consumption data.

Analysis that explores a world without stimulus versus one with stimulus, has been undertaken in the United States by Broda and Parker and Johnson, Parker and Souleles They use individual-level household data to show that tax rebates or bonus payments are effective in stimulating consumption, especially among low-income groups.

The US Congressional Budget Office has lent its support to this style of careful empirical analysis, regarding it as the most valuable in gauging the effectiveness of consumption measures.

While the consumption aspects of the second major stimulus package were important, because the global recession was expected to be deep and long, infrastructure spending played the central role.

You might be tempted to ask why did the Government not just undertake infrastructure spending as part of its second large stimulus package, especially as IMF analysis suggests infrastructure spending is the most effective in stimulating activity, followed by tax rebates or bonuses and followed in turn by tax cuts.

In fact, 70 per cent of the Government's second stimulus package was comprised of infrastructure spending; but the key reason, as I noted earlier, for also including support for consumption was the speed with which it would provide support to the economy. Australian governments have attempted to use infrastructure spending to support the economy in the past.

Unfortunately, the experience has not been wholly successful, with much of the infrastructure spending and activity not getting started until the economy was already recovering. The Government and its advisers had absorbed this lesson and set about designing an infrastructure component of the stimulus package focused on quick-starting mid-scale infrastructure. The largest component of the infrastructure package, the school-based infrastructure spending, has a number of elements that both enable speedy construction and maximise the impact of the stimulus across Australia.

These include the immediate availability of school land upon which to construct new buildings, hence no planning delays. The school buildings that are being constructed by States have standard design features. That is, schools choose from standard designs rather than developing their own designs, to speed up construction. School-based infrastructure spending also has the added advantage of providing stimulus to almost every population area of Australia.

This was important because the slowdown in Australia is not expected to have an especially strong geographic focus. That is, the economic weakness is expected to be geographically broadly spread and therefore it is useful if the stimulus is geographical broadly based.