If the headlines on Australia’s economic outlook were a painting, they’d look like a Bosch – pitfalls and ghouls taunting us from the supermarket to the petrol pump. Or maybe it’s the sense of impending doom conveyed by Munch’s Scream.
Adding darker strokes, concerns about a recession were circulating last week after RBA Governor Michelle Bullock said another rate hike could still be on the cards.
That’s a scary prospect for homeowners – Compare the Market analysis found even a 0.25% hike could add $97 onto monthly repayments on a $600,000 loan*.
Despite the gloomy rhetoric, I think the reality is a lot lighter. Don’t get me wrong – it’s certainly not a heavenly outlook but I don’t think it is really hellish either.
Even the Treasurer’s latest predictions are a lot more upbeat with inflation forecast to hit the 2-3% target band by the end of the year.
If you do believe it really is going to get as sad, bad and gloomy as some economic boffins predict, here are some things you can do to land yourself safe in the clouds and avoid a money nightmare.
Strengthen your savings buffer
The obvious way to ensure a soft landing in tough economic times is to plump up your savings safety net.
While rising costs may seem to be eating into our bank accounts, on average, Australians have built up record savings levels.
In fact, data from the Australian Prudential Regulatory Authority (APRA) show household deposits grew from $947 billion in March 2019 to $1.469 trillion in March 2024, thanks to our money lockdown during the COVID-19 pandemic.
When push comes to shove, we’re pretty nifty savers. So if tough times are ahead, can we go back to our pandemic lifestyle? Spend quality time with family at home and plan some cheap and cheerful holidays for some well-deserved downtime.
Assess your employer
Insolvencies are at a record high, and if they’re going to get worse in the new year, you might want to check out the stability of your company.
If the economy is going down, unemployment is going to go up. We’re starting to see redundancies, and we’re starting to see a lot of lead indicators showing unemployment could rise pretty quickly.
If you’re not sure, now could be a good time to make sure your employer is on solid ground. Good talent is still in high demand so explore your options now while the job market is tight.
Create your own rate cut
It could be a while before the RBA reduces the cash rate, but that doesn’t mean you have to suffer.
Compare the Market analysed rates from 18 lenders on its panel and found it’s still possible to nab a rate with a five in front.
Let’s say you refinance to a rate of 5.94% off a rate of 6.74%. For someone with a $750,000 home loan on a rate of 6.74% switching could help them reduce their monthly repayments by more than $400. That could go a long way towards covering your grocery and petrol bills for a week or two.
Make budget relief go further
The year’s Federal Budget will deliver cost of living relief in the form of energy rebates, rental assistance, and a freeze on the cost of PBS prescriptions. And that’s on top of extra relief in certain states.
In Queensland, a $1000 energy rebate will be applied to all energy bills from 1 July. That’s set to make a huge difference when, according to data from Compare the Market, average quarterly electricity bills in the Sunshine State are around $332.
That money will go even further if you check and make sure you’re on a competitive energy plan. Right now there are electricity offers with up to 22% of the benchmark price which could mean big savings over a year.
Time now to paint a brighter economic future.
*Survey conducted in January 2024
*Based on owner occupier 30-year loan with no fees on a rate of 5.94% moving 0.25%.
David Koch is Economic Director at Compare the Market
