Sydney, Australia – When Rachel Clayton was attending primary school in Sydney, Australia, at the height of the 2007-2009 global financial crisis, the Australian economy was the envy of governments around the world.

Unlike all other major advanced economies, Australia emerged from the worst economic recession since the Great Depression without entering a recession.

Today, Clayton, 22, navigates the world of work rather than the classroom, and an economy in which his international stature has been much less prominent.

Far from being the envy of the developed world, the Australian economy is growing at its slowest pace since the early 1990s, barring the Covid-19 pandemic, and is lagging behind many of its peers.

Australia’s GDP grew by just 0.8 per cent year-on-year during the first three quarters of 2024, compared with expansions of 3.1 and 0.9 per cent in the United States and the euro zone respectively.

Without migration-driven population growth, Australia would actually be in recession because per capita growth has been negative for seven consecutive quarters.

Like many of her peers, Clayton, who graduated from the university in 2022, is pessimistic about the country’s economic outlook.

Although she works full-time in public relations and lives at home with her parents, she works part-time as a personal trainer to help make ends meet, including food, bills, insurance, and operating costs. car.

“I’m very lucky that I still live at home. It’s not like I have to pay rent, but I still have to pay for other things in life,” Clayton told Al Jazeera.

“If I take a short break from my part-time job, I find myself struggling,” she said.

Like many countries, prices in Australia have soared in the wake of COVID-19, with inflation peaking at 7.8% in December 2022, while wages have stagnated.

While wages across the OECD have risen by an average of 1.5% since 2019, real wages in Australia are still 4.8% below pre-pandemic levels as of last year, according to OECD data.

Clayton said she didn’t have many expectations for owning a home because it’s difficult to build savings and property is unaffordable in Australia, one of the most expensive markets in the world.

“I guess [my generations] “They are focused on finding security in other ways,” she said.

“It’s just existing [financially] Security is no longer an option, so you may as well use your money however you can.

After emerging from recession in 1992, Australia had a record 28 consecutive years of sustained economic growth until the world was hit by the coronavirus in 2020.

Since recovering from the pandemic, the economy has struggled to get going amid rising interest rates, falling productivity and slowing demand for Australian exports such as iron ore.

Even if Australia isn’t officially in a recession, it’s not much different than a recession for those struggling to pay their bills despite having a full-time job and a decent income.

Before Christmas, a survey conducted by the Australian Salvation Army found that one in four Australians were concerned that their children might miss out on gifts, and 12 per cent were concerned that their children might miss out on food.

Much of the financial stress has been caused by rising mortgage repayments due to successive interest rate increases by the Reserve Bank of Australia (RBA).

After cutting its benchmark interest rate to near zero in response to the pandemic, the Reserve Bank of Australia raised interest rates to 4.35% in a series of moves aimed at taming inflation.

In September, Treasurer Jim Chalmers pointed to the high interest rate environment as a major reason for the slowdown, saying hikes were “destroying the economy.”

Matt Grudnoff, chief economist at the Australia Research Institute, said the Reserve Bank of Australia had played a “huge role” in the country’s current economic struggles.

“We know that consumer spending is particularly low in Australia at the moment, and that makes up more than half of GDP. And so you know, while consumers in Australia are not spending, the economy will grow very slowly,” Grodnov told Al Jazeera.

Grudnoff said the ongoing shortage of housing supply was another contributor to the hardship faced by many Australians.

Australia is expected to face a housing deficit of 106,300 by 2027, according to a report by the National Housing Finance and Investment Corporation (NHFIC).

The shortage, which contributes to rising property prices and rents, has been a problem for years but only gained national attention in the wake of the pandemic, Grodnoff said.

I think it’s because we haven’t had high inflation [before]said Grodnov.

“The truth is that until you face a crisis, it is often easy to ignore the problems,” he added.

With next year’s federal election looming, politicians from both major parties are looking at limiting immigration as a way to ease cost-of-living pressures.

Facing significant post-pandemic labor shortages, Australia lowered its barriers to international students and skilled migrants in 2022, leading to a record net migration of 547,200 arrivals the following year.

Facing mounting pressure over housing and strained infrastructure, the Labor government announced in 2023 that it would reduce the number of permanent migrants to pre-pandemic levels, and the following year proposed a cap on the number of international student arrivals.

While the government estimates that net migration for the 2024-2025 fiscal year will reach 340,000 people – about 200,000 people less than in 2023 – this will still be 80,000 people more than its target.

Trent Wiltshire, deputy director of the Economic Prosperity and Democracy Program at the Grattan Institute, said immigration was a boon for the economy rather than a cause of its fundamental weakness.

“Our per capita living standards have fallen recently and have been pretty stagnant for a while now. So there was a problem pre-coronavirus as well, which was the fact that our economy wasn’t performing as well as it should have. So we need productivity-enhancing reforms to start,” Wiltshire said. In raising our standards of living.

“This is certainly not the cause of weakness,” Wiltshire added, referring to the growth-boosting effect of immigration. “So this is an important distinction to make.”

In late December, the Labor government released its mid-year economic forecasts, forecasting GDP growth of 1.75 per cent and a deficit of $26.9 billion in 2024-25, the first since the party came to power in 2022.

Nicky Hotley, an independent economist, said many of Australia’s problems stem from a lack of productivity growth and “robust and intelligent debate on tax and revenue”.

Hotley said the approach taken by successive governments to spending and investment had laid the foundation for the current weakness in the economy.

She said while other countries had used the pandemic as an opportunity to make investments in future growth engines such as green energy, Australia had spent money without any sense of long-term vision.

We spent money building houses that would have been built anyway. “We didn’t do that, we didn’t use that income wisely, and now we’re back exactly where we started,” Hotley told Al Jazeera. “At the end of the day, Australia is a small, open economy that is dependent on other countries like China. We need to diversify more.”

“And I think this is the lesson that every country has already learned after the Corona virus, [which] She added: “It is to diversify your import and export markets.”

“But you also have to make sure that you encourage investment and that you have the right frameworks to do that.”