Rising interest rates and unemployment won’t be far from the minds of those who lived through Australia’s last major recession in the 1990s. But in 2023, with a debt-laden nation paying off homes many bought at record high prices, rising rates mean a new type of misery. Australia’s housing market has completely changed the nature of our economy. And as Alan Kohler reports, many of the old economic rules may no longer apply.
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BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
REVEALED: Best Investment During Inflation
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Australia’s three-decade-long streak without a full-blown recession might be coming to an end. With the devastating impact of the COVID-19 pandemic, experts are raising concerns about the Australian economy’s ability to withstand such a challenge. The once resilient nation is facing several headwinds that pose a significant threat to its growth and potentially mark the end of its impressive run.
For those unaware, Australia’s economy has been the envy of many developed nations since its last recession in 1991. This unprecedented period of growth, commonly referred to as the “Lucky Country” narrative, has showcased Australia’s ability to weather global economic downturns and emerge relatively unscathed. However, as the world grapples with the coronavirus crisis, it seems Australia may not be able to continue riding this wave of prosperity.
One of the main factors jeopardizing Australia’s economic performance is its heavy reliance on China. The Asian economic giant is Australia’s largest trading partner, particularly in sectors such as resources and education. As tensions between the two nations escalate due to political conflicts and trade disputes, the Australian economy is vulnerable to disruptions in these critical sectors. Any significant reduction in Chinese demand for Australian goods or services could have a severe impact on the Australian economy.
Another challenge facing Australia is its domestic housing market. Housing prices have soared in recent years, making homeownership increasingly unaffordable for many Australians. With the economy now experiencing a downturn, people are losing their jobs and struggling to repay their mortgages. This combination of reduced buyer demand and potential housing price drops poses a significant risk to the stability of Australia’s financial system. A crashing housing market could send shockwaves throughout the economy, leading to a recession.
Additionally, Australia’s tourism and hospitality industries have been hit hard by the pandemic. International travel restrictions have severely limited the influx of tourists, resulting in significant revenue losses for these sectors. While domestic tourism could provide some relief, it is not enough to make up for the absence of international visitors. The continued closure of international borders and the uncertainty surrounding when they will reopen further complicates the recovery efforts for these sectors.
Some argue that the Australian government’s response to the crisis has been commendable and could potentially prevent a recession. The implementation of stimulus packages, such as JobKeeper and JobSeeker, has provided much-needed support to businesses and individuals affected by the economic downturn. The Reserve Bank of Australia has also taken significant measures, including cutting interest rates to historic lows, to stimulate spending and investment. These interventions may help soften the blow and set the stage for a recovery.
However, despite these efforts, there are numerous challenges ahead that could tip Australia into a recession. The road to recovery will be long and uncertain, and the country must adapt to a post-pandemic world with new economic structures that are less reliant on sectors threatened by global events.
In conclusion, Australia’s impressive 30-year run without a full-blown recession is under threat. The combination of China’s economic tensions, a vulnerable housing market, and the decimated tourism industry due to the pandemic are all substantial challenges that the country must overcome. While the government’s response to the crisis has been robust, Australia’s economy will likely experience a significant slowdown in the near future. The nation must prepare for the possibility of a recession and seek new avenues for sustainable economic growth.
The highly paid experts at the RBA reacted hysterically to covid and dropped rates too low for too long. Now we all pay for their damage. The RBA board should be replaced with a coin toss, far better informed than this lot!
This is not all bad
It will open doors for young people to buy housing at a more realistic price.
If people cannot afford 250-1000 extra per month they should not own a home in the first place.
Always busted my arse to live in this rent trap costing 2400 per month for basic housing.
People think its bad to pay such high mortgage rates atleast you will own your own home.
We dont want the government raising tax to cover all these pensioner and low income households that shouldnt own a home in the first place.
This will only further punish and prevent eternally renters from ever buying.
They think a mortgage is hard how about pay rent and save for a deposit? Because thats where renters are at.
You think you need a 2nd job how about the renters taking a 3rd job on. I dont know what the average mortgage holder is working but myself im averaging 74 hours per week with larger weeks over 100hours.
When you take a step back and look at it, life is a strange and lovely experience. Working with a financial expert may genuinely set you up for success in life. I'm glad I was able to contact my coach, Rodger Michael Karl, earlier this year since, while others were complaining about the downturn, I was busy cashing out from my portfolio, eventually making over six figures in the first quarter alone….
If you are not in the financial market space right now, you are making a huge mistake. I understand that it could be due to ignorance, but if you want to build generational wealth, and cultivate financial knowledge, you must be in the market.
I'm a landlord who has several properties on mortgage and for rent at the moment. Let me tell you how the interest rate hike affects me and my tenants. First, the interest rate hike only narrows my profit for the moment. Pain? A little bit, but I don't suffer. What I do is raise the rent to cover the additional cost. Who is going to suffer? My poor tenants who are honest workers and students who cannot afford their own homes. The hike will just kill their hope to save money for a home that they can call their own. Thus, they rely on us even more and work for us even harder. Who is going to benefit from this? It is people like me in the long run. People, especially the young ones, will have to rent because they can never afford a home. What about landlords of commercial properties? They do the same – raise the rent. All additional cost eventually will be bourne by the consumers and businesses. Hence, higher inflation and interest rate like a vicious cycle. This is how capitalism works, folks. Those who make money will continue to make money regardless of the interest rate hike. It is the poor mass who have to pay the price. Does the RBA care? I don't think they do because they represent us and they work for us – the Capital. They are chosen for the job because they follow orders in the best interest of the Capital. I have to say – the Liberals ensure we make money, and the Labours ensure we continue to make money. Seriously, I love Australia because I'm a capitalist and I'm a winner.
Money we work for and borrow actually has no real value at all
I can only think that the IQ levels around the world have dropped dramatically. No doubt this is due to the overuse of mobile phones and a significant reduction in thinking and in actually talking to real people. Plus, now that we have full-blown AI, people will probably think less and instead spend more time talking to artificial intelligence on their computers. Zomby apocalypse here we come.
taxing its self into collapse. but complaining about inflation but doing everything to hurt our economy. who's gonna invest into anything 100s of billions in taxes from smoking now vaping but still struggling but will build shooting galleries for illegal goods as we alienated smokers now vapers cut government spending. housings market is now another issue. cars inflation houses inflated we can't tax out of issues.
Typical ABC,, One-sided story
Average interest rate in Australia is 7%. I always remembered this when bought cheap apartment instead of house.
Everyone wants to live like in American movies with a big house and dogs.
The unemployment rate being low does not mean we have a good life! Many people here having a job are given less hours! What is the point of this kind of low rate of unemployment? it is so funny that some companies hire many people however everyone just gets a few hours and then somebody claims that the unemployment rate is low!
The mistake is not the 4% cash rate today but the near 0% previously just to keep the property Ponzi scheme running a little more.
If you don't find a means of multiplying money, you will wake up one day to realize that the money you thought you had, has finished. Investment is key. with the help of a professional broker Mrs Tiessen michell i make a good profit
Australians live beyond their means. Australia is a rich country therefore most people are short-sighted, why buy an apartment if I can borrow enough to purchase a house?
Who cares what happens tomorrow, living the dream culture will bring pain and grief to those who live pay check to paycheck
Good to see an ABC item allowing comments they may even return to a platform for all Australian's not just the progressive far left.
Market is down still, I've been looking up strategies and apparently both bull and bear market condition provides equal avenue to accrue massive gains, and a news article particularly mentioned a 54 year old that made $180k in 5weeks, how do I learn these strategies, my portfolio has been stagnant for months.
A 'wage price spiral' brings horror to the RBA even though it's a modest 3.3% increase to keep pace with inflation. The RBA is oblivious to the struggles of the working stiff.
Those two people said that their rent and bills were something like $2200 a month and they make $2500. But the report said she’s was doing 5 shifts not 4 and he had taken a second job. Are you going tell me I am supposed to believe that they only make $600 a week with both of them working full time. Even a Woolworths/Coles/Aldi worker would clear $600 a week on their own and they say they are both working. There is no way these facts are correct.
A recession was here 3 years ago and its turning into a depression.
I WANT MORE INTEREST ON MY MONEY
BUISNESS IS NOT FOR FREE,,,, IS U OVER COMITED BAD LUCK,,, I WANT MORE RETURN ON MY MONEY HIGHER INTEREST
I hope so, I enjoyed the last 2 recessions… Everything was so cheap to buy. I got a unit in Dee Why For $80k in 1987….Interest rates were 17%, still earned enough to pay for it.:)
Ultimately inflation is the enemy of the rich not the enemy of the poor
The final battle between the 'haves' and the 'have nots' has begun. For every point they raise interest rates the 'haves' with oodles of money stashed in bank accounts rejoice and spend more than ever. Couple that with having been stuck in lock down with no travel options for years and they are spending 3 times as much. Meanwhile mortgage holders were deceived by the RBA into a false sense of security, and these people will pay the ultimate price, further dividing the gap between the 'haves' and 'have nots'.
There is no rule and formula can apply for every situation, Basically, due to the war III between China and Russia, the price has risen, and interest rates need to be raised to suppress inflation. Now the G7 needs to participate in the war to solve the current crisis!After two years of trade wars and three years of pandemic, we knew we would use war to deal with the Communist Party, but we were stopped by many spies!
Australia has nothing to worry for the solar flash will mainly effect the hemisphere. However places like Canada will be hit bad. We may get some blackouts but not to bad. A good idea is to grow some of your vegies in the back yard.
A recession has been breathlessly anticipated by the ABC for decades now…let's see if you can talk up the prospect again now?
Well with this submarine purchases costing into the billions wtf.
Is there anything like proof recession stock? I am 58 years and would like help in managing my retirement portfolio which is currently $1.25M…down from a high of $1.67M…
"as we are now learning" un what was 2008?!?!?!?!!?!?!
Let's not forget it was the government and the rba that caused the inflation by printing billions of dollars to apparently prop up an economy that they had essentially locked down. The main reason for this inflation though is supply driven not demand. But it's the general public that get blamed and gas lit and punished for their mismanagement. Its always the same.
Don’t criticize RBA but yourself being ignorant of where long period of artificially low interest and greed lead to.
Who was in power last time?
Great to see now investors are having to pay same bills as they have made renters pay for last decade
Baby boomers 2 paid 50,000 in 1992 when they were 33 and houses in Cronulla 90,000.
Millenials paid 68,000 in 2022 and exact same house is now 2.5 million.
With everything else tripled in price boomer 2s had FREE education health care baby sitting child care fees and a welfare state
Millenials have to pay high price for all the above
Baby boomers 2 are first generation of ppl that did not fight for the same entitlements they had for their youth, they actually have used the youth as slaves to pay for the latte rent Inheritance pay check and called the youth lazy = sociopaths
Baby boomers to also voted for Millenials to pay a house down deposit fee for an education when they had it FREE
Millenials are slaves to the boomer 2s rentals.
A great book
Baby boomers sociopaths by:
Bruce Cannon Gibney
With an inflation rate of 7 % the value of our dollar will be about half in 10 years. Are we happy with that..?
The rates should never have been so low for so long. Also dont forget that peoples' money has been lent out for peanuts for the last decade or so and this has caused crazy house prices.
Thank you for allowing comments
I grew up Mining for peanuts a a Mechanical Fitter from 1988 to 2008.I still have no house & never will.
Any piece that discusses inflation should have to mention that inflation is 66% caused by soaring corporate profits
What jobs are these people working where he has 2 jobs and she has 5 shifts a week and they only make $2500/m? That’s insane