There’s a lot of angst in our community about the levels of debt we acquired during the global financial crisis. Yes Australia invested a lot of money stimulating the economy. What if we hadn’t? Listen to what happened elsewhere. Joe Stiglitz, a Nobel prize-winning economist writes in the book The Price of Inequality
The 2007-08 financial crisis and the Great Recession that followed cast vast numbers of Americans adrift amid the flotsam and jetsam of an increasingly dysfunctional form of capitalism. A half decade later, one out of six Americans who would like a full-time job still couldn’t find one; some eight million families had been told to leave their homes, and millions more anticipate seeing foreclosure notices in the not-too-distant future; still more saw their life savings seemingly evaporate. Even if some of the green shoots that the optimists were seeing were, in fact, harbingers of a real recovery, it would be years – 2018 at the earliest – before the economy returned to full employment. By 2012 many, however, had already given up hope: the savings of those who would lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Middle-aged people, once confident of a swift return to the workforce, came to realise they were in fact forcibly retired. Young people, fresh out of college with tens of thousands of dollars in debt, couldn’t find any work at all. People who had moved in with friends and relatives at the start of the crisis had become homeless. Houses bought during the property boom were still on the market sold at a loss; many more stood empty. The grim underpinnings of the financial boom of the preceding decade lay exposed at last.
As the GFC cast its shadow over Australia, Treasury Secretary Ken Henry advised the government to “go early, go hard, go families”. I for one am thankful that they did.