A wall of global worry: What to do if our economy gets worse
Economists don’t think Australia is heading for a recession, but increasingly global uncertainty is increasing the risks. This is what Australian workers and retirees should consider.
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Record-low interest rates and Australia’s weakest economic growth figures in a decade have helped fuel fears that a recession may be lurking around the corner.
And the world isn’t doing us any favours. Financial and political worries are piling up all over the planet, creating some serious uncertainty.
Last week’s reading of Australian economic growth (GDP) of 0.5 per cent for the June quarter wasn’t a disaster, but our annual GDP growth of 1.4 per cent now ranks below a majority of large nations.
GDP growth’s 10-year low partially reflects a rebalancing after strong gains in early 2018, but Labor predictably claims we’re cactus and it’s all the Coalition’s fault.
The Coalition — also predictably — says we’re doing fine in a tough global climate that’s seen several big countries slip into negative growth.
It says our economy should bounce back with help from recent tax cuts and interest rate cuts.
But the wider world is full of issues. How’s this for a list:
• The US-China trade war.
• Britain’s Brexit turmoil and new PM Boris Johnson lurching between political crises.
• Donald Trump hurling abuse at his country’s independent central bank for not cutting interest rates more.
• Hong Kong’s mass democracy protests against Chinese influence.
• South Korea and Japan headbutting each other.
• India and Pakistan clashing in Kashmir.
• Negative economic growth in Germany, Britain, Singapore and Sweden — they’re all halfway to a recession.
KPMG chief economist Brendan Rynne describes it as a “geopolitical ring of fire”.
“It’s hotter than it normally is,” he says. Just one or two of those issues flaring at the same time would worry financial markets, Dr Rynne says, but we’re facing more than half a dozen.
Global problems would have to deepen much further to drag Australia into its first recession in three decades. But if they do, it pays to be prepared.
MORE NEWS
What the economic slowdown means for you
What the last recession in Australia was really like
WORKERS
Someone once told me that recessions are great for anyone who’s lucky enough to keep their job.
In a recession, borrowers benefit from even lower interest rates while governments inject financial incentives into households and the economy.
We saw this during the GFC when cash handouts flowed to millions of people and schools got free buildings from the government.
The best bet for an employee is to have a back-up plan. What will you do if your boss goes broke?
Also have an emergency fund — even if it’s just a redraw facility on your mortgage.
INVESTMENTS
Play the long game and don’t be freaked out by sharp falls and market volatility. If you can’t sleep at night, consider offloading shares and investing in something less risky.
SUPER FUND MEMBERS
Superannuation funds are overdue for a negative annual return after rising continuously for 10 financial years.
Super specialists say we should expect a negative return once every five to seven years, so we’re well ahead of the game.
Don’t panic if a weak economy sends super returns lower, but check now how your super is invested and whether you should tweak the asset mix.