From the ‘recession we had to have’ in the 90s, to the Global Financial Crisis of 2007-2009, and now COVID-19. Recent history shows that while Australia has one of the world’s most stable economies, it hasn’t been immune from the odd financial fallout.

Every nation goes through troubling economic periods from time to time, but some crises can be far more severe than others, affecting more people and having impacts which are felt for much longer.

So just how bad is the current COVID-driven economic crisis compared to others experienced by Australians in recent years?

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Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

To get an idea of this, we’ve looked at some key economic metrics (e.g. unemployment rate, quarterly economic decline, inflation etc.) of the three aforementioned major financial crises experienced across Australia in the last 30 years - the early 1990s recession, the global financial crisis and the current COVID-19 pandemic.

But as COVID-19 is still ongoing and changing day to day, keep in mind that at this stage we can’t really say for sure whether the current crisis is more or less severe than past ones.

Things could easily get better or worse. Nevertheless, such comparisons can be insightful, helping to put things into perspective and bring home the reality of the situation.

1990 Recession vs GFC vs COVID-19


“Recession we had to have” (1990-1992)

Global Financial Crisis (2008-2009)


(March 2020 - ???)

Main catalyst

Global interest rate rises & sharemarket sell-off

Subprime mortgage loan defaults in the US

Enforced lockdown due to a highly contagious virus

Australian population

17 million

21-22 million

25.5 million

Worst quarterly economic contraction

March 1991: -1.3%

December 2008: -0.5%

June 2020: -7.0%

RBA cash rate

High: 17.50% (January 1990)

Low: 5.75% (July 1992)

High: 7.25% (August 2008)

Low: 3.00% (April 2009)

High: 0.50% (Early March 2020)

Low: 0.10% (November 2020)

Average Mortgage Rate (Variable, Owner Occupier, SVR & Discount*)

High: 17% (January 1990)

Low: 9.92% (October 1992)

High: 9.62% & 8.96% (August 2008)

Low: 5.76% & 5.12% (May 2009)

High: 4.52% & 3.91% (March 2020)

Low: 4.52% & 3.59% (April 2021)

Interest rate on 1-year term deposit (average of biggest banks' term deposits for $10,000 deposit)

High: 14.9% p.a. (January 1990)

Low: 5.50% p.a. (August 1992)

High: 8.25% p.a. (July 2008)

Low: 3.00% p.a. (March 2009)

High: 0.90% p.a. (March 2020)

Low: 0.30% p.a. (April 2021)

Annual inflation rate

High: 6.9% (March 1990)

Low: 1.9% (December 1992)

High: 5% (September 2008)

Low: 1.2% (September 2009)

High: 2.2% (March 2020)

Low: -0.3% (June 2020)

Annual credit growth (total private sector, seasonally-adjusted)

High: 15.0% (April 1990)

Low: -1.8% (April 1992)

High: 16.2% (January 2008)

Low: 0.8% (November 2009)

High: 3.7% (March 2020)

Low: 1.0% (March 2021)

Unemployment rate (seasonally adjusted)

Low: 6.1% (January 1990)

High: 11.2% (December 1992)

Low: 4.0% (August 2008)

High: 5.9% (June 2009)

Low: 5.2% (March 2020)

High: 7.5% (July 2020)

Underemployment rate (seasonally adjusted)

Low: 4.0% (February 1990)

High: 7.2% (September 1992)

Low: 5.7% (August 2008)

High: 7.6% (November 2009)

Low: 7.9% (March 2020)

High: 13.8% (April 2021)

Eight Capital Cities' Average Home Price (+Adjusted for Inflation)

$121,260 ($235,513) (1992)

$404,875 ($508,024) (September 2008)

$728,500 (December 2020)

Household savings ratio (seasonally adjusted)

High: 9.9% (March 1990)

Low: 5.7% (June 1992)

High: 10.9% (December 2008)

Low: 3.2% (March 2008)

5.5% (March 2020)

19.8% (June 2020)

Consumer confidence index, lowest point (Westpac-Melbourne Institute)

64.6 (November 1990)

79.0 (July 2008)

75.6 (April 2020)

Retail trade fluctuations (seasonally adjusted)

Biggest monthly fall: -1.4% (December 1992)

Biggest monthly gain: +4.6% (July 1991)

Biggest monthly fall: -1.3% (February 2009)

Biggest monthly gain: +4.1% (December 2008)

Biggest monthly fall: -17.7% (April 2020)

Biggest monthly gain: +16.9% (May 2020)

All Ordinaries worst day (biggest daily percentage drop)

-4.14% (19 August 1991)

-8.2% (10 October 2008)

-9.5% (16 March 2020)

All Ordinaries worst year (biggest annual percentage drop)

-22.39% (1990)

-43.01% (2008)

-9.64% (2020 to 28 July 2020)

Data Sources: Australian Bureau of Statistics, Australian Securities Exchange, Reserve Bank of Australia, Westpac.

* The Reserve Bank did not start measuring discounted rates until 2004. Standard variable rates (SVR) and discounted rates are shown for GFC and COVID-19. 

1990-1992 Recession

When Australia was boastful of its ‘nearly 30 years without a recession’ tag, this was the last recession politicians and economists were referring to. The initial triggers were short and sharp, however the pain was drawn out.

It had its beginnings in the sharemarket crashes in 1987 - labelled ‘Black Monday’ in the US. Soon after, Japan and West Germany (back when there were two Germanies) pushed up interest rates, with the US later following suit and naturally Australia following on from that. Inflation rose with it.

In the later months of 1989, Australia’s cash rate was over 18%, and at the turn of the decade the RBA (Reserve Bank of Australia) made repeated cash rate cuts of over 100 basis points, before stabilising the cash rate at 5.75% in 1992.

High interest rates and inflation in early 1990 soon gave way to high unemployment rates, record low consumer confidence and dwindling asset prices. The unemployment rate remained high for many years, and didn’t fall below 10% until May 1994.

The recession was also characterised by a drastic slowdown in borrowing from households and businesses (many of which had borrowed up to the hilt in the preceding years), with annual credit growth plunging from a high of 15% in April 1990 to -1.8% in April 1992.

All up, there were three quarters of economic decline between 1990 and 1992:

  • -0.6% in September 1990

  • -1.3% in March 1991

  • -0.1% in June 1991

The negative quarter of -0.1% in June 1991 confirmed Australia’s recession status given that it was the second consecutive quarter of economic growth, which satisfies the technical definition of a recession.

2007-2009 Global Financial Crisis

As the old saying goes, when the United States sneezes, the rest of the world catches a cold. And that saying was none-the-more evident than in the 2007-09 crisis. The GFC was arguably the most ‘complex’ of the three crises.

What do people defaulting on their mortgages in the US have to do with us? Well, they triggered banking collapses. Risky lending was in-vogue in the 2000s, and the burst of the dotcom bubble in the early 2000s led many US residents to rush to homes as sound investments. That’s all well and good if home prices continue to go up, but they didn’t - the glut of housing supply soon saw to that.

This was made worse by predatory lending. It wasn’t uncommon to find mortgages with 100% or higher loan-to-value ratios with no payments required for two or three years. Teaser rates were also common, where they dangled say a 5% p.a. rate that then reverted to 12% p.a. a few years later. And these could all be offered to people earning $20,000 as a fruit farmer in California i.e. subprime borrowers.

Non-recourse lending in many states also meant people could just walk away from their homes and their debts without the debts following them. This then made mortgage bonds worthless, which triggered the collapse of banks such as Bear Stearns and Lehman Brothers, which had a flow-on effect down under. Commonwealth Bank bought up Bankwest, while Westpac acquired St. George.

More information on GFC triggers can be found here.

Officially, Australia didn’t do too badly out of the GFC. Largely owing to the ongoing mining boom, we were one of the few countries to not record a technical recession. But outside of mining, many sectors experienced recession-like conditions.

The severity of the global crisis was enough to overcome the effects of Australia’s mining boom and contract our economy by -0.5% in the December 2008 quarter, but as this negative economic quarter was sandwiched between two positive quarters, we escaped a technical recession.

However, the GFC laid the platform for what was to come over the next decade.

While the unemployment rate remained relatively low during the period (the highest it reached was 5.9% in June 2009), personal insolvency and underemployment peaked. Underemployment has generally continued on an upward trend since the GFC. Credit card debt also peaked in 2011, but has been on a general decline since, while interest rates on savings accounts and term deposits have also failed to return to pre-GFC levels.

COVID-19 2020-

Who would have thought a bat or a pangolin could trigger a recession? That’s what’s thought to have started spreading the virus in late 2019, first in China then quickly around the world. By late March 2020, Australia had virtually shutdown its economy, shutting down pubs, clubs, gyms, shops, virtually everything. However, things started brewing before that.

In the years leading up to the pandemic, Australia’s economic performance could be characterised by one word - sluggishness, and one could argue the sluggishness is weariness from the GFC. Like many other developed countries, Australia was experiencing slow GDP growth, perpetually stagnant wage growth, subdued inflation and poor retail sales. The nation’s mining boom also effectively ended.

However, a different boom was helping to keep Australia’s economy growing, albeit at a slower pace…housing. Property prices in many of Australia’s biggest cities skyrocketed from 2012 to late 2017 - particularly in Sydney and Melbourne - helping the median Australian adult become the wealthiest in the world. Accordingly, housing construction accelerated, with cranes littering many city skylines. Being the capital city of Australia’s mining state, Perth was a notable exception to this, experiencing falling prices since 2014 amid the downturn in mining.

Meanwhile, household debt, particularly home lending, and average home loan sizes were at record highs in 2017 while housing affordability also became a major concern, particularly among younger generations. The boom in housing construction eventually led to fears of an oversupply of properties in a number of cities. Thereafter, house prices started to fall in 2018, which wasn’t helped by a mini-credit crunch as lenders tightened up their loan criteria amid accusations of irresponsible lending practices and the sharper scrutiny of banking in general during the banking royal commission. The house price falls seemingly found a floor in mid-2019 before prices recovered slightly leading up to the pandemic. Australia still has one of the highest household debt levels in the world.

Somewhat spooked by the fall in house prices, which was accompanied by a fall in consumer spend (thought to be the 'wealth effect' in action), the RBA cut the cash rate three times in 2019 (June, July and October). Perhaps sensing a storm was coming, household savings rates accelerated leading up to the pandemic, from a low of 2.6% in June 2019, up to 5.5% in the March 2020 quarter.

News of the coronavirus started to spread in early 2020, and fears of its impact on Australia’s economy became real in February when Australia closed its borders to Chinese arrivals - right when thousands of Chinese students were soon to arrive for the start of the university semester. Australia’s economy relies heavily on Chinese arrivals for its lucrative education and tourism sectors.

Having also endured one of the worst bushfire seasons on record, things already weren’t looking good for Australia’s March quarter economic performance, but then the lockdowns and domestic border closures took place in late March, accelerating the downturn.

Unsurprisingly, Australia’s real GDP fell -0.3% in the March quarter, but this compared favourably with other nations throughout the world:

However, the June quarter results were far worse, down 7.0%, which is the worst quarterly figure in Australia’s recorded history, with data going back to the 1950s.

Unsurprisingly, the lockdowns and border closures drove the unemployment rate up, but only from 5.2% in March to 7.5% in July. Newly-introduced stimulus measures - particularly JobKeeper, which is primarily aimed at keeping people on the payroll - is thought to have kept the unemployment rate relatively low (so far), albeit artificially. A sharp fall in the participation rate is also thought to have kept it pretty low (if you don’t have a job, but aren’t actively looking for a job, you’re not considered unemployed).

However, a more telling statistic might be the underemployment figure, which peaked in May 2020 above 13%.

This indicates people are willing and able to work, but can’t find as much work as they might have hoped. This has coincided with the rise in a casualised workforce and the gig economy (spurred on by platforms such as Uber and Airtasker). It’s interesting to note in the 1980s, underemployment was as little as around 2.3%.

But then, some weird stuff happened. Due to Government stimulus responses, and not having as many outlets to spend money, the household savings rate skyrocketed. 2021 is also off to a bumper year in terms of house prices and housing credit, so much so there is talk of a 'housing bubble'. However, the strong housing credit growth was offset by flatlining 'other' credit growth, such as personal loans, credit cards, and business lending, resulting in just a 1% growth in March 2021. The long story short is, watch this space...

Comparing Government Responses

Some might say we’ve learnt from both the 1990-1991 and 2007-2009 recessions. Compared to other countries, Government responses across the three crises have generally been swift and effective, essentially enacting Keynesian economic policy, but we won’t bore you with that.

  • 1990-1991: No direct government cash handout, but the company tax rate was slashed by 10 percentage points to 39%. There was a wage rise for some unionised workers and a budget surplus enabled income tax cuts for the 1991-92 financial year.

  • 2007-2009: Prime Minister Kevin Rudd launched a stimulus package in 2009, paying a one-time lump sum of around $950 to anyone earning under $80,000 a year, estimated to cost the budget $40 billion.

  • COVID-19: The Morrison Government introduced a temporary increase to JobSeeker unemployment benefits, a $1,500 JobKeeper wage subsidy and two $750 payments for certain welfare recipients, along with many small business stimulus measures.

What these crises all have in common

You may have noticed a recurring theme or pattern of events between these three crises. Often, there’s a sneeze or a cough years prior, which is then followed on by economic response, which is then followed by material losses felt by the consumer. To summarise succinctly:

  • 1990-1991: Has its roots in the 1987 stockmarket crashes and interest rate rises > Inflation follows, and interest rates are cut dramatically > The consumer feels it into the mid-1990s with higher prices, high unemployment and lower savings ratios.

  • Global Financial Crisis: Has its roots in the dotcom sharemarket bubble of the early 2000s, which crashed soon after > US residents flocked to home investing and banks capitalised with predatory lending and dodgy mortgage securities > House prices dwindled and central bank cash rate cuts could not keep up > Trigger effect causes unemployment, hits to savings and a peak in credit card debt in 2011, yet Australia largely escapes unscathed due to mining boom.

  • COVID-19: With Australia wounded from the GFC, key mining prices slow down in the mid 2010s and our dollar weakens > Most key economic data is sluggish e.g. wage growth, inflation > Underemployment is also rising, house prices and mortgage lending critically high, and household savings low > Bushfires, border closures and early lockdowns contribute to negative GDP growth in March 2020 quarter > COVID-19 lockdowns hit economy in late March, triggering higher unemployment.

Compared to the previous two crises, to keep it short, the COVID-19 recession went from 0 to 100 real quick, and then appears to be recovering much quicker. The lockdowns coincided with a fairly sluggish period prior, and a pandemic really could not have come at a worse time. It all seemed like a perfect storm, and the chapter hasn't closed on us yet. will endeavour to stay on top of the key numbers and deliver the timely, important information that’s easy to read.

Article first published 29 July 2020, last updated 13 May 2021.

Photo by Ewien va Bergeijk-Kwant on Unsplash

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