Federal Treasurer John Frydenberg confirmed Australia is in a recession and there’s more pain ahead

Australia may be facing one of the greatest economic disasters since the Great Depression, but there are steps worth taking to save your money.

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How quickly things change.

Just last month Federal Treasurer Josh Frydenberg should have been delivering the nation’s first budget surplus in more than a decade.

Instead we have a delayed Budget until October and the Federal Government is knee-deep in one of the greatest economic disasters since the Great Depression in the late 1920s and ’30s.

We have the coronavirus pandemic to thank for this economic ruin that has struck the Australian and global economies.

And now we face our first recession since 1991 – a thought that seemed laughable at the start of the year.

A recession is typically defined as two consecutive quarters of Gross Domestic Product (GDP) contraction, which are all but certain to occur.

Results from the March quarter show Australia reported its first quarter of negative growth in nine years.

And Treasurer Frydenberg confirmed that based on information from Treasury we are in recession right now. There’s no need to wait for the June quarter to confirm this.

Many Australians have been hit by difficult financial times during the pandemic.

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So there's no disputing 2020 has been a horror one – the economy has been left bruised and battered by drought, bushfires and now COVID-19.

We now have millions more Australians suddenly on welfare – many of whom will need to stay on welfare until at least September and possibly beyond – and we have a workforce that is fighting for survival across so many industries.

Unemployment is headed for 10 per cent in the coming months and it’s likely many Australian borrowers will need a longer breather on their repayment holidays.

Latest figures from the Australian Banking Association showed there are about 795,000 loans deferred with the nation’s banks worth a combined $224 billion.

Last Tuesday the Reserve Bank of Australia board kept the cash rate on hold at just 0.25 per cent, and RBA governor Philip Lowe said of the economic fallout: “it is possible that the depth of the downturn will be less than earlier expected”.

But he also added the speed of the economic recovery “remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy”.

“In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances,” Dr Lowe said.

For many of us, arriving in a recession is something we’ve either never experienced or can’t remember.

I’m one of these people.

I’m also one of the millions of mortgage customers who have only ever seen mortgage interest rates fall, not go up since, I took out my first mortgage in 2012.

So there’s never been a more pertinent time to review your financial situation, see where you can make savings and hopefully prepare yourself the best you can for the rollercoaster ride that lies ahead.

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@sophieelsworth

Originally published as Federal Treasurer John Frydenberg confirmed Australia is in a recession and there’s more pain ahead