Margaret McKenzie, a senior economist for think tank Per Capita, says the difference between the 1990s and the GFC is that the government stepped in to try to avoid a recession, and did so in a major way.
To avoid an economic crash, in 2008 and 2009 the Rudd Labor government announced economic stimulus worth more than $52 billion, which included pre-Christmas cash payments to millions of Australians and a large infrastructure program.
“That massive package of government expenditure, that actually saved us during the GFC,” McKenzie says. “And that was fairly clear because Australia managed better out of that than a lot of other countries did, and that was because we had a bigger fiscal stimulus at the time.”
Similar government intervention at the start of the pandemic also helped limit the impact of the nationwide shutdown.
McKenzie says it’s too much to expect the Reserve Bank to manage a soft economic landing alone this time around.
“It’s going to be fiscal policy that really determines, as it did during the COVID period, how well we handle it, whatever recession is coming,” she says.
Originally published June 18, 2023, in the Sunday Morning Herald, by Rachel Clun. Full article available here.