The economic vitality report: the impact of the GFC on Australians

• Robert Tanton, and others
• National Centre for Social and Economic Modelling

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15 March 2010Althrough the global financial crisis proved to be more of a slowdown than a recession in Australia and that the economy improved throughout 2009, this report finds that more people felt their personal circumstances had declined.

The impact of the Global Financial Crisis (GFC) on financial markets first became apparent in 2007. However it was not until September 2008 that the Reserve Bank of Australia responded with the first in a series of decreases in official interest rates. By December 2008, the GFC was starting to affect individuals and households, causing changes in consumer confidence, employment, and income and expenditure patterns.

Key findings include:

1 The Global Financial Crisis (GFC) proved to be more of a slowdown than a recession in Australia.

2 A high level of concern existed in the economy in early 2009. This was short-lived owing to effective fiscal and
monetary policy measures, and by the end of 2009 economic momentum began to lift, recently confirmed by
economic growth data.

3 The GFC had a divergent impact on different age groups:

• data shows that 18-24 year olds (Gen Y) were hit the hardest with the highest levels of unemployment, increased reliance on government benefits, and salary growth just above inflation over the period December 2008 to December 2009. Despite this they remained the most optimistic and showed no evidence of slowing down their spending;
• the most restrained group of Australians were those aged 24-35, possibly reflecting saving to take advantage of the First Home Owner Grant and in the later part of 2009, reflecting the impact of increased interest rates on existing home owners; and 
• real income growth for the highest earning groups – those aged 35-44 and 45-54 – increased by 2.8% and 3.7% respectively. Those with the highest increase were aged 55-64, where salary payments increased by 6.0%.

4 Indicative of the success of economic policy, spending across the board increased and spiked following government cash handouts and tax cuts. There was no evidence of consumers having a frugal Christmas in 2009.

5 Even though the economy improved throughout 2009, more consumers felt their personal circumstances had declined.

Published by Commonwealth Bank of Australia

Prepared by: Robert Tanton, Marcia Keegan, Yogi Vidyattama and Linc Thurecht, National Centre for Social and Economic Modelling