Is Australia heading for a recession?

There are signs that Australian is heading for a recession.  Across the globe we are seeing economic and political turmoil. This week in New York the Wall Street Stock Exchange suffered its worst trading day in 2019. It has set tongues wagging that the United States is heading for a recession and if so, will Australia follow? Other signs of a recession are a slowing economy; falling house prices; unemployment figures rising; and international trade wars.  

Currently in Australia there is a conversation happening about how hard it is for people to live on Newstart (a support allowance for people who are unemployed). If anyone is on Newstart they are vulnerable. They might have to rely on others for shelter, food and transport. The Australian Council of Social Services research shows that over 3 million people in Australia are living below the poverty line. That is one in eight adults and one in six children.

Are small businesses struggling?

I have noticed that many small businesses in Toowoomba are struggling. A few months ago, the Post Office in a North Toowoomba shopping centre closed down. At the same time three other businesses closed their doors, a hairdresser, a Brumby’s (bakery) franchise and a burger shop. Then I noticed a café in the main street of Toowoomba had closed its doors. It was an iconic and long-standing business, Café Rendezvous (a touch of Paris on Ruthven Street). Shops in an arcade in the Toowoomba CBD are empty. Some small businesses seem to be doing reasonably well, but are they?

Then in contrast there are major developments taking place in Toowoomba. New developments in the CBD, and new businesses opening in the suburbs. The Qantas Pilot Training Academy based in Wellcamp (Toowoomba) opens in a couple of months. Are such initiatives helping offset the decline into a recession. But this still does not explain what is happening with many small businesses.

Will construction and government infrastructure initiatives offset a recession?

Are the multi-national companies taking business away from small business? Costco has made the move to Australia and now Kaufland, a German warehouse style supermarket, has settled in Australia. This is what small business is up against and many small businesses are going to the wall. Like one of my family who had a small bakery business on the Gold Coast. It was an ongoing battle competing with Woolworths and their low prices. Then again, we all like the lower prices. Who doesn’t like a bargain? But does a bargain in the long-term have a higher price?

How would people cope today if mortgage rates were close to 19% as they were in the 1980s? Even though mortgage rates are at an all-time low people are not using the extra money to pay down their mortgage. They are using it to pay down debt. Debt on credit cards; debt due to borrowing for a car or furniture; debt due to an overseas holiday; debt due to living the good life – spending more money that what is earned.

Is it any wonder in Australia that the Debt Clock is ticking away. The government and household debt levels are frightening. Our nation cannot continue under this heavy debt. If we continue to spend more than we earn and keep borrowing at unacceptable levels the outlook is dismal. If spending patterns do not change it is likely Australia will inevitably take a long slippery slide ride into a recession. What will life be like then?

Leave a Reply

%d bloggers like this: