Australia's money-making banks and supercharged housing market played a big part in the country's recent economic good times, so it only made sense they would be at the fore when things started to look less rosy in 2018.

The US-China trade biff, overseas rate rises, the UK's messy Brexit negotiations and US share market wobbles meant not all problems were homegrown, but falling home values in Australia's two largest housing markets and bank misconduct loomed large during a testing 12 months.

The big four banks and the federal government finally submitted to the royal commission they had long resisted, resulting in the public airing of customer complaints and admissions by lenders of serial misconduct.

Suddenly, a decade or so of rising profits stalled as banks set aside millions for refunds and compensation over scandals that included charging dead people for advice.

consumer spending retail growth economy

Slowed consumer spending growth was among several factors weighing on the economy

AMP (ASX: AMP) went into meltdown - losing its chief executive, chair and half its market value when it became clear the 169-year-old firm had compounded its wrongdoing by lying to regulators - and the heavyweight financial sector slumped. As a result the ASX200 headed for just its second post-GFC year of losses.

Even before Commonwealth Bank (ASX: CBA), NAB (ASX: NAB), Westpac (ASX: WBC) and ANZ (ASX: ANZ) were hauled over the coals at the royal commission, CBA had changed chief executive and been slammed by regulators over its internal culture.

The lenders reacted to unprecedented scrutiny, increased intervention, rising funding costs and frothy housing markets by making loans more expensive and harder to come by - with predictable consequences.

Sydney house prices that had been inflated by cheap, easy credit headed south and are certain to hit record declines early in 2019, while No 2 market Melbourne - which peaked after Sydney - wasn't far behind.

Meanwhile, those increased mortgage rates reduced the amount of cash in customers' pockets.

Slowed consumer spending growth combined with stubbornly low wage growth, a housing construction slowdown and the east coast drought resulted in the economy expanding by less than predicted by the Reserve Bank of Australia.

So, while central banks overseas raised rates, the RBA left the cash rate at a record low 1.5 per cent for a second straight calendar year.

Some economists are now convinced the RBA will be forced to sit on its hands, not only through 2019, but through 2020 as well.

Those lighter consumer pockets hit Australian retailers hard during a year in which Amazon slowly started to up its local game despite the federal government now forcing overseas firms to charge GST on all imports.

Menswear retailer Roger David closed its doors for good after 76 years, Laura Ashley went into administration and Toys R Us collapsed, showing that even the biggest companies aren't immune to changing spending habits and mismanagement.

Myer (ASX: MYR) slumped to a $486 million loss, took yet more impairments and dumped its chief executive as the once grand department store chain struggled to turn things around in the age of fierce competition and online shopping.

Billionaire businessman Solomon Lew spent 2018 in the same way he spent much of 2017, sniping from the sidelines in an attempt to persuade fellow shareholders to force change in the Myer boardroom.

The Premier Investments chairman got the second strike he wanted on executive pay, but not the numbers for a board spill, leaving chairman Garry Hounsell and new CEO John King to fight on.

Myer's strife came among a big increase in strikes on executive pay as investors - feeling the pinch from slow wage growth and declining property values - turned on those they perceived to be pocketing healthy bonuses while overseeing falling returns.

More than 60 per cent of Telstra (ASX: TLS) shareholders opposed the telco's remuneration report despite a pre-emptive cut in executive bonuses following a 30 per cent cut in dividends, an 8.4 per cent fall in profit, network outages and 8000 job cuts.

Things could get tougher for Telstra following August's announcement by TPG Telecom (ASX: TPM) - which in December avoided a second strike - and Vodafone Australia of plans to merge into a single $15 billion telecommunications giant.

The most high-profile merger of 2017 was that of Nine Entertainment (ASX: NEC) with Fairfax, a move that created a new media giant with TV, online, newspaper and property assets, but one that spelled the end of the 175-year-old Fairfax name and has already led to nearly 100 redundancies.

Elsewhere, Wesfarmers (ASX: WES) spun off Coles (ASX: COL) supermarkets and ended its disastrous UK hardware venture after burning through $1.5 billion, Gina Rinehart got hold of ASX-listed Atlas Iron, and Viva Energy (ASX: VEA) floated on the ASX in Australia's largest IPO since Medicare Private in 2014.