What Does the Recession Mean for Me?
For many Australian’s, the memories of the last recession have been buried deep by almost 30 years without one.
Now that Australia is officially in a recession after two quarters of economic decline, the big question is – How will this affect the community moving forward?
A recession can be felt by an increase in unemployment, salaries declining, mortgage repayments being placed on hold or a reduction in household spending. And likely to be a combination of some or all of the above. Many of these things have already been experienced since the beginning of the COVID pandemic.
When people begin holding on to their pennies, unsure of when their next paycheck will be, or if their job is at risk, businesses feel the impact of the reduction in sales.
Economic data from previous recessions shows getting a job is significantly harder, especially for young Australians.
The 90’s saw youth unemployment peak above 20 per cent, a steep increase from the 1.2 per cent we generally see the unemployment rate* at.
For those lucky enough to hold their jobs, pay rises are unlikely with wages growing at their slowest pace in 22 years*.
What about interest rates?
With so many spending less than usual and many uncertain of their employment, it could be easy to assume that banks are hesitant to lend. And in the current economic environment, it is certainly harder for some to secure borrowings.
In the 90’s, the Reserve Bank of Australia (RBA) reduced their interest rates from 17 percent to below 5 percent over three years*.
Despite interest rates being quite low at the start of 2020, the economic impact of the pandemic has seen interest rates reduce even further.
In March the RBA cut interest rates twice to a record low of 0.25 per cent, with these rates likely to remain for several years.
Want to learn more on what a recession is and could mean for Australia? Read our article here.
We are in a recession… so what’s your plan?
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- Accessing Super Early: What Your Future Self Would Tell You
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- Are You Investing for Income or Capital Growth?
- You Can Be Young Without Money, But You Can’t Be Old Without It
* ABC News: What does being in a recession mean?
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