The Uneven Impact on Households
Edited by Ray Forrest and Ngai-Ming Yip
Chapter 8: The Impacts of the Global Financial Crisis on Housing and Mortgage Markets in Australia: A View from the Vulnerable
8. The impacts of the global financial crisis on housing and mortgage markets in Australia: a view from the vulnerable Mike Berry, Tony Dalton and Anitra Nelson INTRODUCTION By most accounts, the Australian economy and housing sector have been spared the worst effects of the global financial crisis (GFC) that broke out in the USA in 2008 and spread rapidly through most developed economies (IMF, 2009a). What has turned a seemingly localized default crisis in the US residential mortgage markets into ‘The Great Recession’ has been the combination of low interest rates in the wake of the dot.com boom and 9/11, and the increasing interlinkages and fragility of the financial systems in the USA, Europe and Japan. This meant that many more people than defaulting mortgagor households were negatively affected by the GFC. Economic contraction, rising unemployment and mortgage defaults have reinforced each other in a downward vicious circle. Failures in the banking and shadow banking sectors have spilled out into the real economy, most notably in the US automobile industry, resulting in unprecedented monetary interventions and fiscal stimulus policies by national governments, including those in the large emerging nations (for example China). Australia, almost alone among the developed economies, has not (yet) gone into ‘technical recession’. Although growth has slowed significantly, it was positive in 2009, unlike the forecast 3.9 per cent contraction for developed economies as a whole (IMF, 2009b). The ‘credit crunch’ that has hamstrung other economies has emanated from the pervasive insolvency threat hanging over commercial...
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