The Finances Of Fear: The Global Economy In Our Backyard
?I was in a cafe the other day, on the south coast, talking to the cook about how business had been since the last time I came through. Business, somewhat unsurprisingly, had been slow, this August had been one of the worst periods he had ever seen. It was true of every business up and down the main street. I said something about the overall health of economy, how much better shape we are in than our American or European equivalents. Something about how the government seemed confident that the mining boom would protect the rest of Australian industry. And he replied “They just have no idea what they’re talking about, what it’s like from here”. It left me wondering about the dynamics of an economy, and about the difference between what it feels like fir you and me and what it looks like on paper.
Strong Industries, In Pockets
Before going any further it is, of course, important to recognise that the Australian economy is strong, irregardless of how it might feel for people working in retail, hospitality, or finding it hard to keep up with costs of living. Our banks are solid, we have a relatively low amount of debt and are blessed in natural resources. Actual recession is unlikely, unless of course, this slump that everyone seems to feel starts manifesting in numbers- as in, we talk ourselves into a recession. I have no financial background, but anecdotally it would seem to me that part of the reason for the slump is that the strong Australian industries are localised, and don’t transcend across to the rest of us. The obvious example is mining; we stand in our now-quiet cafe and talk about the money in Western Australia, how impossible it is for locals to afford houses in mining towns, about the money that must go through a pub every Friday night or when the shift clocks off. And while there is a trickle-down effect, it doesn’t seem to be moving that quickly. So, for the people on the ground, there are strong industries but the knock-on seems to be taking a while.
Money, In Pockets
There are indications of money being spent, contrary to popular opinion. There were one million new cars sold in Australia last year. That is a huge number, especially when you consider that research is showing we are apparently all tightening our belts. There’s talk of the cost of living, the price of electricity, rising rent, yet somehow one million of us found the money for a new car. And at those kind of numbers, it can’t be a trend restricted to the super-rich. This figure has a couple of interesting aspects- firstly, that people are finding money for a car despite increased pressures in other areas. Secondly, they are doing so in spite of the expense of running a car, rising petrol costs and the threat of global warming. Thirdly, in a time where are apparently paying down our debt and saving, some people are instead spending money on a depreciating asset. In direct opposition, there appears to be attend where people are not getting dental work done. No longer restricted to those without health insurance, even those well-covered are avoiding it as they can;t afford the gap. It’s a worrying indicator- at least about the way we are spending our money. I have several friends who have ended up with serious dental work because they let a relatively easy problem escalate because they couldn’t afford care.
So What Does It Mean For our Finances?
From what I’ve been hearing, there is without a doubt a strong air of anxiety about grassroots finances. The slump in retail and hospitality works as both a symptom and cause. It’s also happening all across Australia. But some of these trends would suggest, our anxiety is not manifesting in sensible financial planning but in knee-jerk reactions. The first step is to acknowledge the general atmosphere, while also appreciating that we are in a stronger position than it might seem. The second step might be to balance our finances across all areas- would there be enough money for all our bills if we weren’t running two cars? The third step is the hardest, waiting it out. Pay down debt, keep saving, ride the ups and downs that is the economy. And maybe treat yourself to a cappuccino now and then- the waitress will feel better about things.
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