Australia in the early 1990s was a country of boarded‑up shopfronts, for sale signs that lingered for months, and queues of job seekers clutching their résumés outside Centrelink offices.
Mortgage repayments surged off the back of 17 per cent interest rates, businesses collapsed, and unemployment climbed above 11 per cent as families watched their savings disappear and dreams of home ownership or secure work slip out of reach.
For the first time in more than three decades, Australia faces the possibility of an economic shock that could be just as socially destructive - and in some respects even worse.
Reserve Bank assistant governor Sarah Hunter has warned that if higher‑than‑ideal inflation becomes the new normal, bringing it back under control may require 'a more substantial slowing of economic activity', the kind of slowdown Australia endured during the early 1990s recession.
That should jolt anyone who remembers what that period actually felt like. The early 1990s recession wasn't just a line on a graph or a gloomy chapter in an economics textbook. It was a lived disaster for thousands of households.
Youth unemployment approached 30 per cent, businesses failed, and families lost homes. Young people entered the labour market at precisely the wrong moment.
The economy eventually recovered, as economies do. But recovery in the statistics came long before recovery in ordinary life.
Most Australians in the workforce today have no adult memory of what a serious recession actually feels like.
Daily Mail political editor Peter van Onselen warns Australia could be heading toward a modern version of the brutal early 1990s recession, arguing today's economic pressures may hit households in very different ways
Peter van Onselen argues a modern recession would stretch far beyond job losses, with mortgage stress, rental pressure and white-collar insecurity potentially hitting Australians hard
Anyone under about 53 years of age wasn't an adult during the last truly severe economic downturn.
Anyone under 40 has little or no memory of it at all.
For many younger Australians, recession is something that happened overseas during the global financial crisis, or something briefly experienced during COVID before JobKeeper, ultra‑low interest rates and emergency spending blurred the consequences.
A modern 1990s‑style recession would be very different, without all the assistance.
A serious downturn today wouldn't simply mean a few more people looking for work.
Whole categories of employment would suddenly become fragile. White‑collar workers who have never thought of themselves as exposed would discover that they are, especially with the rise of artificial intelligence adding to the pressures.
The modern labour market is more flexible than it was in the early 1990s, which sounds efficient until the cycle turns.
Flexibility is wonderful when firms are hiring, but it's far less comforting when businesses are cutting hours, freezing contracts, shedding casuals, and telling gig‑economy workers there is simply less work to go around.
Prime Minister Anthony Albanese and Labor face scrutiny over whether current policy settings are making the Reserve Bank's inflation fight harder
Cafés and small businesses could be among the first casualties in a serious downturn, with discretionary spending often drying up quickly during recessions
Then there is housing to worry about. The lazy comparison is to say interest rates were much higher in the early 1990s than they are likely to get now. But that misses the point entirely.
Household debt today is vastly larger relative to incomes because house prices are far higher relative to wages. The average borrower today doesn't need 17 per cent mortgage rates, as occurred prior to the 1990 recession, to be in deep trouble.
A modern recession would move through the housing market in two directions at once: mortgage holders would be squeezed by rates, job insecurity and falling confidence, and renters wouldn't be spared either. Landlords with higher interest costs would try to pass them on where they could. Those who couldn't might be forced to sell at a loss.
For younger Australians, there would be a cruel twist in how it all plays out. Many already feel locked out of home ownership.
A recession might lower some asset prices for a while, but it would also make banks more cautious, jobs less secure, and deposits harder to save for. Cheaper housing is not much use if you are unemployed.
A 1990s‑style downturn would also hit small businesses such as cafés, restaurants, gyms, retailers, tradies, builders and discretionary services more broadly.
The modern economy has a vast layer of businesses built on the assumption that consumers will keep spending, even while complaining about the cost of living.
That assumption collapses quickly during a recession.
Construction could be among the hardest-hit sectors in a major downturn, with developers pulling back, builders failing and apprentices at risk of losing work
The COVID period conditioned many Australians to think the state can simply step in whenever things go wrong
Construction would be especially vulnerable at a time when supply is already constrained and Labor has tipped uncertainty into the mix with its CGT and negative‑gearing changes.
The RBA has already warned that higher fuel and raw‑material costs are expected to lift inflation further, with underlying inflation forecast to remain above three per cent until at least mid‑2027.
In a downturn, that becomes more than just a pricing issue. Projects get delayed, developers pull back, and builders with thin margins fail. Subcontractors go unpaid, apprentices get let go, and housing supply, already inadequate, gets even worse.
And a change in the budget that few noticed saw Labor lift the requirement for annual audits from businesses with a $50m turnover to those with a $100m turnover.
That will look incredibly reckless in a recession when such businesses start going under and they weren't audited.
Anyone who loses money will want to know why Labor reduced transparency that might have warned investors what was coming ahead of time.
The Albanese government isn't responsible for every pressure now confronting the economy. But governments don't get marked only on what they cause. They get marked on whether their policy choices make the problem better or worse. Right now, Labor is making the RBA's job harder than it needs to be.
The central bank is trying to pull inflation expectations back into line.
A modern-day version of the 1990s recession would likely look very different. Instead of factory closures and traditional job losses dominating the picture, there could be greater pain across white-collar and service industries, rising mortgage and rental stress, and growing insecurity from casual and gig work
That requires restraint and a sense that the whole economic policy apparatus is pointing in the same direction. Yet fiscal policy keeps sending mixed signals. The government talks about fighting inflation while continuing to spend big, as well as intervening in ways that risk sustaining demand at the very moment demand needs to cool.
Economists have said that the budget does little to ease near‑term inflation, leaving the inflation fight largely to the RBA. Labor spent more than it saved by billions in the budget, including across four years of forward estimates. No wonder the RBA is panicking.
This is the great dishonesty of modern economic politics. Governments claim to be easing cost‑of‑living pain, but if they fuel inflation or delay its defeat, they risk extending the very pain they say they are relieving, and worsening it substantially if they cause a recession.
A recession caused by external shocks is one thing. A recession brought on because fiscal policy lacked restraint is quite another.
The COVID period conditioned many Australians to think the state can simply step in whenever things go wrong.
It can, in an emergency, but doing so when inflation is already the problem is much harder. If the RBA is trying to suppress demand and the government is simultaneously trying to cushion everyone from that suppression, policy starts fighting itself.
A modern 1990s‑style recession wouldn't look exactly like the old one.
There would be more online work, more service‑sector pain, more mortgage stress (despite lower nominal rates), more rental stress, more casualised job insecurity, and more political anger amplified through social media, which can become self‑fulfilling.
If a recession does happen, Labor can't say it wasn't warned.