The title of this post isn’t any kind of forecast – more a reflection that inevitably there will be another recession. Below we have a guest post from Mitt’s Mate, who’s been reading and thinking about the topic.
I was reading the Sydney Morning Herald (SMH) today and noticed this article by Ross Gittins. The introductory paragraph is: “I’ve always hoped the next recession, when it comes, will be a mild one. But Ian Macfarlane, recently retired Reserve Bank governor, thinks it will be deeper than last time because households are more financially exposed than ever before.”
It got me thinking about the level of debt and financial preparedness by members in Australia. Taking Ian Macfarlane’s comments a step further (assuming he is correct) and I wonder how members, in fact all people, would react to a prolonged period of financial market weakness.
Australia hasn’t experienced a significant downturn in our economy or financial markets for many, many years. Sure, we have had the small speed hump but nothing like you might find in history. Out current level of debt seems fine when property prices are holding, but take away the supportive environment of property prices, and even a strong job market, and it may be another story.
As I write this my mind goes back to President Hinckley’s speech of some years ago where he likened the dream of Pharaoh interpreted by Joseph (think fatted cows) to our day and asked if we were prepared financially. I think it will require more than 12 months of wheat and long life milk!
[See the bottom right hand graph on page 3 of this RBA chartpack for an illustration of the debt issue Mitt's Mate is referring to - echo]