You don’t need to be an economist, a political scientist, or a data analyst to understand that Australia and – more so – the World is not in a very good financial place right now.
I want to keep this post very short, so I don’t want to delve too much into history, nor do I want to focus too heavily on numbers and statistics. That being said, I have to highlight a few things that people need to understand.
Firstly, the Global Financial Crisis of 2007/2008, was the largest and most significant economic events in the Post-War era. Whilst the GFC centred heavily on the US, Europe and the UK, every country around the world was affected by it. Banks and insurance companies closed, people lost all their life savings, people defaulted on their mortgages and lost their homes, stock markets fell, and economies were on the brink of demise.
A lot of policies, laws and regulations were put in place, banks were bailed out by the government, and given a small slap on the hand and told: “don’t do that again.. bad banks”.
Like a lot of things throughout history – no one learned anything.
Banks haven’t changed their ways, they are still acting the same the way did back prior to the GFC, people are still recovering and rebuilding, and the shocks of the GFC have been building and building, and we are on the verge of another massive crisis. The World economy is on a knife-edge.
In addition to this, we have political turmoil all throughout the globe that is driving up prices of trade and resources and large countries such as Russia, China, Iran and the US, are on the verge of war. Not a war fought by soldiers, or with weapons; the next World War will be fought with currency and it will be fought with trade embargos. I like to call it, ‘Economic Disruption’.
On top of this, all around the world, the poor are getting poorer, the rich getting richer, and people are highly leveraged. In Australia, Private-Sector Australian wage growth was 1.9% and falling. Public-Sector steady at 2.3%. We’re in desperate need of growth. We have low economic growth, high household debt, banks carrying more risk, and the cost of living is at an all-time high.
There are people with mortgages that can’t afford more than a 1% increase in Interest Rates… and let’s be real here – interest rates aren’t staying this low forever. What happens when they go up? People lose their savings trying to get relief, they end up losing their homes, and the banks end up selling off their risk. Adding yet again not only to housing affordability but also to housing availability.
On top of all this, the Australian government made a decision today that will affect around 1,000,000 Australians. A large majority of which are Australia’s lowest paid workers. Taking away penalty rates, whilst having the potential for some positive effect on stimulating job growth, will have a massive negative effect on every day Australians.
It will take money directly from the wallets and purses of folks who work on Sundays, many of whom might already struggle to live week to week. In addition to this, it is very simple: wage cuts reduce income, and therefore, spending. This directly affects the economy.
In addition to this, casual workers could lose their Sunday work all together as it would now technically be cheaper for small businesses to have their full-time and part-time staff work instead.
Anyways, I said this was going to be a short post and it is quite clear that I lied. So what’s my point after all the economic rambling?
Well, my point is quite simple – things are going to get very hard over the next 6 – 12 months. 2007/2008 was tough, but I fear that if we (as in the developed world) don’t start to right the ship, it’s not going to be a small recession with a few people losing their jobs and homes. It’s going to be absolutely devastating.
This isn’t a fear mongering opinion piece, it’s coming from a place of concern. For the next 6 – 12 months, people should be looking to tighten their budgets and be a little bit more fiscally responsible, because I sincerely worry that the worst is yet to come.
I also worry that it’s too late to change anything. We had a warning almost a decade ago. We didn’t listen, and we’re about to pay for it (quite literally).
The sky is falling, and it’s falling fast.
Let’s just hope that we can ride out the next few waves, shocks and ripples, let’s hope that our World Leaders start working together to avoid another depression, and let’s hope that – if the sky does fall – we can quickly rebuild.