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But seriously

Prompted by the poster who mentioned Four Corners last night - I watched it  and I cant help thinking we are looking like a depression, not a recession. So what are the policy options? Are there any? Anyone else looking for people they love who are still taking financial risks, getting into debt and not knowing what to say to them?  I have a close friend who is about to make a financial decision which I cant believe is a good idea and I don't want to sound like a debbie downer but it just seems mad. But I also know, if people don't spend, the economy suffers as well. Its circular. 

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hmmph

Yep, same. Last major global pandemic was followed by depression (and global upheaval) and I'm torn between saving money and spending money. Federal government doesn't inspire confidence.

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SplashingRainbows

Nup. Not concerned at all. 

People stopped spending because shops largely shut. Instead a vast number of the population saved money. The best savings rate we’ve had in donkeys years. Now people are spending closer to home. Many businesses I work with are having their best quarters in a long time. 
 

some people are facing difficult financial circumstances and I 100% feel for those doing it tough financially. But there are huge numbers who are not and unemployment numbers are no where near what was anticipated. 
 

negativity sells. 

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22Fruitmincepies

The top end of town in Perth is looking strong, $3M+ houses are selling quickly, you can’t get a landscaper to even quote as they are too busy, holiday houses are selling fast. If there is a recession coming they have all missed the signs. Or maybe it will pass them by and just hit the middle and the poor :(

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-Emissary-

The divide between the rich, the middle class and the poor will widen.

The people who will be most affected by this recession will be the low income earners and people who are already in casual jobs. 

Money flows very circular in the economy so the pain will eventually be felt by almost everyone even those in secured jobs. Major organisations have already put in hiring freezes and are talking about massive restructures. 

What the Government needs to do is to start spending money. They need to bring forward large projects and start stimulating the economy. They need to create jobs. They should look at investing in health, education and also grants and tax concessions for small to medium businesses. They also need to reassess the jobkeeper and keep it at a liveable amount so that people don’t fall below the poverty lines. Will they do all that? Probably not. The Coalition have absolutely no experience on how to steer a country through tough financial times. 

I am very risk adverse so there is no way I would make big financial decisions at the moment. I am consciously trying to make sure I don’t tighten the wallet too much but putting away enough in our savings. 

Edited by -Emissary-
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blueskies12

I think everyone would be effected in some way, but the lower-middle income earners (us!) would be feel the effects more. In the 30s depression the lower income earners were the hardest hit- for example the shanty towns, and men sleeping rough town to town to get work.

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Lucrezia Bauble

yes I’m deeply worried about it. it’s going to be ugly, and will take years to recover. 

 

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kadoodle

The wealthy became wealthier during the last depression; while the poor became destitute. The middle classes were pushed under, as nobody had cash flow to trade themselves out of trouble.

By cutting into welfare and taxes on the well off; we’re heading back there again. 

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Meepy

Also we were well on the way to recession without covid.  The economic growth was built on immigration which was unsustainable in the long run.   University profits were inflated by ripping off international students.  The huge growth of casualisation and the gig economy has led to people taking multiple insecure jobs to earn a living wage.  The whole economy has been a little bit like a Ponzi scheme for the last 5 years or so.

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Just Another Cat
4 minutes ago, Sugarplum Poobah said:

It's going to be a bloody disaster if this goes through -- the protection you thought was there? All about to go...

https://www.abc.net.au/news/2020-09-28/rescinding-of-responsible-lending-legislation-hurts-borrowers/12708810

We know the best way to avert a recession is to spend big. This is the governments idea of spending. Let the low/middle class spend borrowed money. That’s going to go well. 

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melanieb530

I'm trying to work it all out too and it feels uncertain, for example in Perth houses seem to be selling really quickly in comparison to recent years. People are saying that it's returning Australians pushing up the demand. Yet I'm a bit confused as to whether all these people would have jobs to service a loan having just arrived back in WA. 

I had one small business owner telling me that they recently had close to 300 applications for one casual retail job and another small business owner saying they could only get 4 applicants for a cleaning job (none of who actually appeared keen to actually turn up and work) Wages would have been similar for both jobs.

So many businesses seem to be closed, all the suburbs near the city have stretches of roads where there are dozens and dozens of "for lease" signs in the windows. Endless "for lease" signs that are anywhere I drive, including the central city shopping malls and suburban shopping centres. I've never seen anything close to this at all in over 50 years. 

It seems like surely there must be a lot of people out of work, yet most of the people I know are all still in their regular jobs. 

Some private school that were previously "exclusive with long wait lists" are now advertising heavily on the radio and on the backs of buses and via letterbox leaflet drops to fill their vacancies. Although the mid priced school one of my children attends is still full with waitlists. 

Overall lots of contrasts and I'm not quite sure how to interpret it all. 

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JRA
1 hour ago, Meepy said:

Also we were well on the way to recession without covid.  The economic growth was built on immigration which was unsustainable in the long run.   University profits were inflated by ripping off international students.  The huge growth of casualisation and the gig economy has led to people taking multiple insecure jobs to earn a living wage.  The whole economy has been a little bit like a Ponzi scheme for the last 5 years or so.

Oh I feel someone has been spying on our house

ponzi scheme is mentioned a lot in the same sentence  as economy 

 

 

 

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can'tstayaway
11 hours ago, kadoodle said:

The wealthy became wealthier during the last depression; while the poor became destitute. The middle classes were pushed under, as nobody had cash flow to trade themselves out of trouble.

By cutting into welfare and taxes on the well off; we’re heading back there again. 

Yes.  The wealthy are getting richer during this pandemic too.

I’ve read references to Covid being a ‘poor person’s disease’ in the US.  The rich can afford to isolate and access health care if they do get it, but it’s the poor who can’t afford to isolate and can’t afford health care.  I saw statistics that showed over 70% of people in poorer New York areas (districts?) had Covid antibodies.  It was something like 13% in the wealthier areas.  

The circularity of the economy means that as the poor become destitute and the middle class go under, the genuine wealthy (those who actually have cash and not just the appearance of it) will be able to buy lots of assets at discounted prices.  

I know of a business that was for sale late last year for $250k.  They have progressively discounted until it is now $50k and there is rumours that the owner will let it go for nothing if someone will take over the lease.  This is a business that is clearing approx $100k a year!  And during Covid too.  

I also know of a property that has sold for several millions dollars above market price.  Cash price, no conditions and short settlement.  The owners were not planning on selling but they were approached and offered an astronomical amount by an interstate buyer who is planning on living in it immediately.  I’ve heard of other similar stories but I know this one quite well.  

I know of a number of restaurants whose business is going gangbusters.  During the shutdown, they were so successful that they not only were not eligible for Jobkeeper but they were doing better than preCovid.   They just managed to innovate themselves to provide a product that people wanted.  The new Covid safe way of prebooking, set menus and prepayments is suiting some restaurants as it provides certainty.  I also know others who have closed their doors permanently.  Most of those have already been replaced by new restaurants or established ones moving into the space.

Retail who are adapting to easy online  shopping are also doing well.  I have noticed that the traditional Australia Post network is slow and there are retailers who advertise that they deliver via x,y,z service with guaranteed express delivery.  I’ve had packages delivered in utes and ordinary vehicles that are not associated with the usual large courier companies.  I was a little weirded out initially but I’m also happy to be supporting a small business/individual operator.

I know not everyone can adapt quickly enough without feeling pain.  It’s why most people are happy to pay tax and contribute to the government redistributing wealth to support others.  

My point is that for those who choose a narrow field of vision, they can see the economy as all bad or all good instead of the many shades of grey that it is.

I think Frydenberg has a decent understanding of this.  The Job Keeper/Seeker packages looked like his brainchild as well as the MMT idea of growing the economy out of debt.  It is not a theory that Morrison ever alluded to or showed support for when he was Treasurer.  If that’s true, I hope Frydenberg has more sway and influence with the preparation of the budget which will steer us out of the recession.

I have hope that the government and RBA is more willing to be proactive in cushioning the economic downturn than compared to the past recession.  The RBA has shown they are willing to act with respect to lowering interest rates as well as quantitative easing.  The federal government has put in policies to reduce the likelihood of banks foreclosing on residential mortgages.   They are also changing the rules regarding administration and liquidation of small businesses to allow them to attempt to trade out of trouble.  I can see the risks of a potential avalanche of bankruptcies and liquidations down the track but I also think an owner may be best placed to try and steer a business out of trouble rather than an arms length administrator.

We need State governments to be spending on nation building projects. It will create jobs and infrastructure for the future.  Infrastructure Australia has a big long list of projects that are needed.  This is the time to tackle them.  

I fear the biggest loser of this in Australia will be the environment.  We don’t have governments at any level who are seriously interested in making real change.  When financially distressed, individuals will make choices that are in their best short term interest which is often environmentally detrimental.  Fast fashion.  $1 milk from supermarkets.  The cheaper and disposable option etc.  We need government to make the hard decisions and cushion the impact on the vulnerable.

 

Edited by can'tstayaway
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But seriously
12 hours ago, SplashingRainbows said:

Nup. Not concerned at all. 

People stopped spending because shops largely shut. Instead a vast number of the population saved money. The best savings rate we’ve had in donkeys years. Now people are spending closer to home. Many businesses I work with are having their best quarters in a long time. 
 

some people are facing difficult financial circumstances and I 100% feel for those doing it tough financially. But there are huge numbers who are not and unemployment numbers are no where near what was anticipated. 
 

negativity sells. 

Interesting. I think suburban restaurants (not in melbourne) of course are doing pretty well. I'd love to see an infrastructure package that included social housing as a priority

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can'tstayaway

Jeff Bezos’ personal wealth has increased over $80 billion since the start of the pandemic.  He’s worth over $200 billion!

This graphic of Australian billionaires shows how much they have increased their wealth this year.  

But it’s not just the uber wealthy who are doing well during Covid.  There’s a UBS study that shows the wealthiest 77% of households (I think it’s American) have increased their wealth during Covid.  It’s always the poor who suffer.

 

3456EC96-32A4-4AF8-9B04-6C75E5E6D299.jpeg

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But seriously
12 hours ago, 22Fruitmincepies said:

The top end of town in Perth is looking strong, $3M+ houses are selling quickly, you can’t get a landscaper to even quote as they are too busy, holiday houses are selling fast. If there is a recession coming they have all missed the signs. Or maybe it will pass them by and just hit the middle and the poor :(

Yes well there is that. Certainly the high end private schools are advertising like mad. No fee increases and the like. The top top end probably will largely be ok, unless they are over geared themselves. But so many businesses are impacted, and there is a flow on, there has to be

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71Cath

Why don't we seem to be able to learn from history?  1918 Spanish flu is there as an example but we seem to wilfully ignore it.  1 million people dead, it boggles the mind.

I used to wonder if my kids would be able to buy a house, now I wonder if they will ever have a secure job?

What is Gina et al doing with all their millions?  Stuffing mattresses?  I hope it keeps them warm at night :(

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hmmph

Yeah, the rich will be fine! There was a post in a group I'm in, g8 the child care company have put a spending freeze on supplies. An educator who earns not very much (guessing around the 50k mark) was saying she couldn't afford to keep purchasing paper, pencils, paint and stationary for the staff and children out of her own money. She was told it's tax deductible so its fine. The ceo earns $850,000 (I'm guessing there's lots of executive with a healthy pay packet.) The rich will be fine. 

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Lesley225

Tax deductible means nothing most people would only get 30% back.  Still a 70% outlay.

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71Cath
12 minutes ago, Lesley225 said:

Tax deductible means nothing most people would only get 30% back.  Still a 70% outlay.

And you've still got to have the money to spend in the first place.

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-Emissary-
25 minutes ago, hmmph said:

in, g8 the child care company have put a spending freeze on supplies.

How do you function as a business without any supplies? That’s ridiculous. 

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hmmph
3 minutes ago, -Emissary- said:

How do you function as a business without any supplies? That’s ridiculous. 

It's child care, so the kids miss out, staff feel bad and spend their own money. There will be less kids at the moment. One of the dominant ideas in this area is the staff do it 'for the love of kids' that makes some of them easily exploitable.

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dadwasathome

It's difficult to see how a recession will be avoided with current and proposed settings, and the risk of depression is very high.

I'm very concerned regarding what will happen with the housing market, given our national policies which prioritise investment in the family home, but also drive debt funded property portfolios. Widespread unemployment will have a huge impact on housing purchase and the rental market.

I have a colleague who is finding that the housing market in her area is hot at the moment, with limited supply of the type of proerty she is seeking. She's (I think quite sensibly) to sit things out for 6 months or so to see how things pan out, rather than buying at what still seems to be a peak.

With growth impacted worldwide by the pandemic, we won't have the lifelines we could grab during the GFC.

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PrincessPeach
3 hours ago, Lesley225 said:

Tax deductible means nothing most people would only get 30% back.  Still a 70% outlay.

More like 80% on a child care staffers wage.

But as a pp mentioned, there were signs we were heading for a recession anyway, COVID just brought this to a head. The extension of the insolvency rules until December 31 I don’t see as a good thing. Very few businesses who are doing badly now are going to suddenly pick up in the next 3 months to the point of no longer trading insolvent.

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