The Exception That Wasn’t
When the GFC tore through the global economy like a financial cyclone in 2008, most countries got absolutely belted. Banks collapsed, unemployment soared, and the idea of "too big to fail" became the slogan of a generation. But not us. Not Australia.
No, we were the smug kid in class who didn’t study for the test but somehow still got an A. As the US housing market imploded and European banks started playing Jenga with their balance sheets, Australia just... kept humming along. No bank runs. No mass foreclosures. No economy-wide collapse. Just a timely $900 cheque from Kevin Rudd and a thank-you wave to China for buying everything that wasn’t bolted down.
We called ourselves the "lucky country" like it was a divine endorsement, not a fluke of history. We congratulated our regulators for being prudent. We told ourselves our banks were better run. That we were just smarter, more resilient, or blessed with superior soil or something.
But here’s the thing: we didn’t avoid the GFC. We deferred it. We offset it. We kicked the can with such enthusiasm that we turned it into a national sport. What saved us wasn’t economic brilliance, it was a combination of a mining boom, record immigration, and the single greatest household debt binge in Australian history.
Let’s be blunt. We avoided the crash by quietly doubling down on the same structural fragilities that caused the crash elsewhere. While the rest of the world was deleveraging, we were strapping a rocket to our mortgage market and blasting off.
In 2008, Aussie households were already some of the most indebted in the developed world. And that was before we turbocharged the housing market with record-low interest rates, negative gearing, first-home buyer grants, and an unshakable cultural belief that property prices only go up.
We didn’t have to bail out our banks, because our households took on the risk instead. Private credit growth—especially in residential real estate—became our unofficial economic stimulus. The government got to keep its fiscal halo while quietly letting the population lever up to the eyeballs.
The result? A country that looked healthy on the outside with strong GDP, stable banks, and rising home values, but was already running on borrowed time and borrowed money.
So no, we weren’t the exception. We were the beta test for a new model of post-crisis prosperity: one built not on innovation or productivity, but on debt, leverage, and the illusion of resilience.
The Quiet Addiction to Debt
If Australia had a national pastime besides footy and a snag at Bunnings, it would be residential property speculation. But what most people missed while polishing their investment portfolios was just how quietly and completely we addicted ourselves to private debt in the years following the GFC.
We didn’t print money like the US or the EU. We didn’t do “quantitative easing.” Instead, we found a more localised, more socially acceptable drug: mortgage credit.
See, after the GFC, the Reserve Bank of Australia slashed interest rates to historic lows, just like every other central bank. But instead of using that cheap money to invest in productivity, infrastructure, or innovation, we used it to bid up the price of the same suburban homes we were already living in. Everyone became a property genius. Your barista had an investment property. Your Uber driver was renovating a duplex. Property chat became our version of macroeconomic analysis.
But this wasn’t just a cultural quirk. It was a fundamental shift in how our economy operated.
Australia effectively outsourced economic growth to the private credit market. Every year, wages stagnated but household debt soared. Why? Because we turned housing into our primary growth engine. When people couldn’t earn more, they borrowed more, and as long as property prices rose faster than wages, the whole thing looked like progress.
From 2010 to 2020, private debt as a share of GDP climbed steadily, with household debt alone reaching roughly 120% of GDP. That’s not a typo. We are one of the most indebted advanced economies in the world. Not because we’re investing in the future, but because we’re obsessed with owning, flipping, and leveraging homes.
But here’s the kicker: this model requires constant credit expansion. Like any good addiction, it needs more of the same drug just to keep the high going. If credit growth slows even slightly, everything wobbles. Housing stalls, confidence drops, and suddenly the whole country is worried about clearance rates in Strathfield.
This is what made us so fragile heading into 2020. On the surface, we looked like we’d weathered the GFC better than anyone. Under the surface, we’d just replaced public bailouts with private leverage and hoped no one would notice.
And for a while, no one did. Until the pandemic hit.
Ctrl+P Comes to Canberra
When COVID hit, the global economy didn’t just sneeze, it flatlined. Borders slammed shut, supply chains snapped, businesses shuttered, and millions were suddenly unemployed. For the first time in over a decade, Australia couldn’t pretend it was immune.
And so, we joined the rest of the world in breaking the glass on the emergency playbook.
The RBA, once proudly conservative and allergic to unconventional policy, suddenly found its CTRL+P keys. Quantitative Easing—the same “temporary” monetary experiment we’d once mocked in the US and Europe—became official policy in Australia.
To put it simply: the RBA started buying government bonds on the open market. Not because it had to, but because it wanted to inject cash into the financial system. The goal? Keep interest rates low, support asset prices, and make sure liquidity kept flowing through a frozen economy.
This was paired with massive fiscal stimulus: JobKeeper, JobSeeker, cash boosts, and business grants. The government and central bank weren’t just coordinating, they were fusing into one giant, debt-fuelled engine designed to keep the illusion of economic activity alive.
And it worked. Sort of.
Markets surged. House prices roared back. Retail spending spiked. Crypto took off like a SpaceX launch. On paper, it looked like a recovery.
But this wasn’t real growth. It was a sugar high.
The same dynamics we’d explored in Part I—the decoupling of asset prices from fundamentals, the dependency on liquidity, the debt spiral—were now operational in Australia.
We’d entered the Liquidity Game. And like everyone else, we were playing with loaded dice.
Liquidity Down Under
If you want to understand post-COVID Australia, forget everything you learned in Economics 101. Supply and demand? Productivity? Competitive advantages? Cute theories. In 2020s Australia, the only thing that matters is this: how much money is being pumped into the system.
We are now a liquidity-driven market. Full stop.
When the RBA fires up the money hose by buying bonds, juicing bank reserves, and pinning rates to the floor, everything goes up. Not because we’re innovating. Not because we’re exporting more. But because there’s a giant invisible hand chucking cash into the system and pushing risk assets skyward.
You might think this sounds a bit abstract. So let’s bring it home: this is why your house jumped $300,000 in value even though your street looks exactly the same. This is why the stock market rallied while small businesses were closing. This is why people were punting on Dogecoin from their Centrelink payments.
Liquidity doesn’t discriminate. It just floods the system.
And because Aussie households were already addicted to mortgage credit, this new wave of cheap money poured directly into housing. Record-low rates meant bigger borrowing capacity. Bigger borrowing capacity meant bidding wars at every auction. Prices soared not because homes were better, but because money was cheaper.
But here's the trick: none of this made people richer in any real sense. Your house might be worth more in Aussie dollars, but those dollars now buy you a lot less of everything else. Your purchasing power didn’t increase, it eroded. You’ve been nominally flattered and quietly fleeced.
This is the heart of the illusion. Liquidity creates price inflation in assets, but not necessarily wealth. It’s the financial version of slapping a fresh coat of paint on a crumbling wall. It looks good until you lean on it.
So here we are. A country that once thought it beat the game is now playing by the same rules as everyone else. And those rules are simple:
When the money printer is on, markets go up. When it’s off, the illusion fades.
And Now We're All In
There’s no exit ramp anymore. No “soft landing.” No magical policy pivot that lets us unwind a decade and a half of compounding leverage, monetised debt, and fabricated prosperity.
The game is the game. And we’re in it now.
Australia is no longer the quirky outlier that avoided the worst of the GFC. We are now subscribed to the quantitative easing game. Our markets increasingly respond to liquidity, not fundamentals. Our central bank is a market participant. Our prosperity is leveraged to the price of our own debt.
We’ve become just like everyone else, only later to the party and maybe still a bit hungover from that last auction in Surry Hills.
The next chapter of this story isn’t about whether Australia can reclaim some bygone era of “balanced growth” or “fiscal prudence.” It’s about recognising the new rules and adapting before it’s too late.
Because if you’re still playing by the old rules—chasing wages, trusting super funds, and hoping housing prices will save you—you’re not just playing a losing game. You’re playing a game that’s already been rigged against you.
In the final instalment of this series, we’ll break down how to survive (and maybe even thrive) in a world where liquidity is king, the fundamentals are dead, and the smartest play is to stop measuring your wealth in dollars.