Al-anwar Newspaper English news in Australia
Our next-door neighbour New Zealand is heading into a recession in 2023 thanks to more big interest rate rises there, and the dreaded R-word is hanging over the US and many other companies. While Australia walks a tightrope to try to avoid its economy sliding backwards, the Kiwi central bank last week forecast a significant recession as it lifted its official interest rate 0.75 percentage points, bigger than any recent Aussie rise, to try to tame inflation.
Even if Australia avoids the traditional definition of recession, which is two quarters of negative economic growth, it may feel like one for many – and that means people may have to rethink some financial decisions.
Here are five common money moves that can turn out very badly in a recession.
1. QUITTING YOUR JOB
Right now, with Australia’s unemployment rate at an ultra-low 3.4 per cent and employers desperate for staff, it’s easy for many workers to switch jobs if their boss dares to look at them sideways.
But in a recession, jobs will fall as the economy shrinks. For a glimpse of this future, look at the mass staff lay-offs currently under way at tech giants Meta, Amazon and Twitter. When a flood of people enters job markets, the power swings back to bosses.
Before making a rash decision to quit, have a plan, and a back-up plan for that plan, about what you will do next. . RETIRING EARLY
Retirement in the 2010s and 2020s is much more flexible than previously, although it’s still a huge decision – especially if you rely on an investment portfolio.
The surging cost of living is already draining households, while property prices have been forecast to fall and the share market could suffer too if economic woes worsen.
An early retirement means there is no age pension safety net, so seniors should ensure their assets are strong enough to support them – knowing that those assets may slide sharply in value quickly, just as they did during the global financial crisis in 2008 and 2009.
3. PANIC SELLING
When economies start shrinking, jobs start disappearing and companies start collapsing, the impact on the stockmarket can be devastating. In the GFC recession near-miss, Aussie shares plunged 55 per cent between November 2007 and March 2009, with similar falls in other countries. Investors who suffered the most from this were those who panicked and sold out near the bottom of the market, because they missed the strong 60 per cent rebound over the following 12 months. 4. INVESTING AGGRESSIVELY Money flies to safe havens in times of turmoil, so now is not the time to splash all your cash on risky technology investments and cryptocurrencies, or borrow heavily to invest money in an environment where interest rates are rising and asset values
