But we are unlikely to see a return to the earlier boom conditions. Second, all other things equal, interest rates are likely to be lower in such a world than they were in a world in which households were extending their finances. This is a global phenomenon, but it holds in Australia too.
The ensuing financial turbulence quickly morphed into a general deterioration in overall credit conditions; and this dragged down economic activity and threatened fiscal sustainability in numerous countries. Moreover, many governments had to intervene in domestic banking sectors to preserve financial stability. This resulted in a massive transfer of liabilities which in some cases overwhelmed government balance sheets.