13 Reasons Australia Won’t Have a Recession
There’s a lot of talk about Australia potentially going into a recession but here are the reasons why Australia might not have a recession.
0:00 – Introduction
1:25 – #1: Reducing Interest Rates
1:51 – #2: Helicopter Money
3:25 – #3: Tax Cuts
4:16 – #4: Reducing The Currency
5:47 – #5: Taxing the Wealthiest 1%
6:51 – #6: Making Money Easier To Borrow
8:25 – #7: Infrastructure Projects
8:53 – #8: Extra Fiscal Stimulus
12:42 – #9: No Sign of Properties Flooding The Market
14:17 – #10: The Political Environment Remains Sensible
14:45 – #11: Population Growth Remains Strong
16:55 – #12: The RBA Can Still Do More
17:46 – #13: Quantitative Easing
19:13 – What to do to take care of yourself
Article The Inspired This Video: https://au.finance.yahoo.com/news/9-reasons-why-australia-not-heading-for-recession-015157795.html
there’s been a lot of talk lately about australia as well as the world potentially going into a recession and i recently read this article from property update.com de u which stated nine reasons why australia is unlikely to go into a recession and so today i am joined by buyer’s agent ben everingham from pumped on property how’s it going
good man just a bit casual today been thrown a few baskets with you filming this one
yeah so we wanted to i guess have this counter argument conversation about why we paid may potentially not have a recession when everyone else is talking about having a recession because i think it is very important to look at both sides of the story because we didn’t have a crystal ball we don’t know what’s going to happen different economists say different things even the most highly educated economists don’t know what’s going to happen and then the government continually makes changes to try and stop recessions from happening and so yeah so i just thought it’d be something really interesting to talk about
it’s actually funny that you brought this up because the a couple of weeks back my partner went away for the weekend with and i had the kids and obviously having nothing to do at night i said you know look after sleeping kids i picked up ray dalio his new book which is called big debt crisis and it talks about exactly this and all the like there’s five major things governments around the world can do to pull a country out of a recession and australia’s doing all five of them right now
so what are those five things yeah so then we’ll probably cover some of them in these points we definitely
do so the first and most viable one is to obviously reduce interest rates so it reducing interest rates helps to make money easier that money flows back into the economy and can help improve sentiment which it’s already doing in australia and that can have a knock on flow on effect as business confidence goes up more people get employed property you know prices become easier to hold so that’s one the second one is called what they call helicopter money remember in k-rod kevin ryan in the gfc just basically dropped money onto every single australians account like 1000 bucks or so yeah
i didn’t i didn’t get the money at the time i can’t remember why but neither me nor my wife at the time got any
any too much money because no i definitely wasn’t
i don’t know why i fell out of it but i remember yeah i remember working in pharmacy and you know everyone was getting their payment
it’s a really really powerful thing because if he dropped the money that theory is if you drop the money into the hands of people that earn less than 90k a lot of people that earn less than 90k move money week to week and so that money comes straight through the economy and if you look at the sydney morning herald article a couple of weeks back the second page was like what are you going to drop your money on a new handbag like they’re already setting people up to like just go spend that money coming yeah so right now you know and over the next probably four weeks as part of liberals like policy around getting reelected was to change the tax rates for individuals earning less than 90k and so people will get between 250 bucks and 1500 bucks extra back in their tax return this year is a subtle way of doing it other ways they’ve done it is the baby bonus k rods like helicopter drug you know they do it in subtle ways but
that’s a huge way and that’s the thing it’s not week to week as in people getting less tax so i guess ongoing it will be like that but this time around because everyone was you know taxed at the higher rate it means that you’ll get a refund or get a refund
another one that they do like the third most important one is tax cuts so if you look at the liberal party’s plan between now and 2024 the tax rate for people earning up to 200 grand at the moment is like 45 to 50 cents in the dollar by 2024 with the tax cuts coming anyone earning between 90,200k will pay no more than 30 cents in the dollar tax now that might not sound like a big change but that is huge amounts of wealth being created for average people those
so it’s a huge thing and if you know your history what happens is when they do these things that money goes into because people want to live in better places they rent higher quality homes or they go and buy more expensive stuff like whether that’s like material stuff or whether that’s properties that’s another thing that do another thing that they do according to ray is they reduce the currency which you’ve seen as we’re going to talk about in a moment
yeah which is happening as the australian dollar has gone down a significant amounts and 98% yeah something like that since 2011 obviously between when we record this and when we release it like it’ll fluctuate again but it’s definitely down because i know i have a bunch of sites that earn us dollars and i’ve also got a bunch of expenses in us dollar so it kind of balances out for me because what i earned in usa spend in us but definitely when a big us check comes in now it’s like oh that’s nice because it’s i guess it’s good for me because it’s i’m getting $1.40
at interview ending us box right now
whereas back in the day i’d get $1 almost $1 or a bit over
and you’ve seen this like you’ve seen the australian dollar go up to like in the gfc i remember friends of buying currency and i didn’t have any money but i was watching them and they were buying us dollars for life you know australian dollars were worth more than us and it fluctuates and it’s a game that they play they’ve just pulled that one so the australian dollar is way down which means property prices are more affordable people buying stuff from us like me iron ore minerals like gold whatever is cheaper and real estate becomes significantly cheaper you know what i mean like if you’re in it or if you’re at $1 us right now and you can trade it to australia for 60 cents you know you making a big margin on the way in
yeah and then what was the fifth one
the fifth one is taxing the wealthiest 1% so right now in the world the wealthiest 1% and over 90% of the income globally it’s actually less than that it’s like the the top 0.1% now and like 90% of the world’s wealth and this this happens in these long wave periods where all of the money after like a great depression or a gfc gets distributed out to everyone and then wealthy people collect that money again and when when wealthy people start collecting all that money you get people like trump going in you get people like putting getting in and staying in you get different types of people that are like yeah we’ll look after everyone that look after themselves yeah and so that’s another way that they can sort of impose taxes that heavily taxed the wealthiest people but races that’s like least obviously is one of the wealthiest people in the world is probably like don’t tax us we’ll just take our money to the caymans or to ireland or wherever else is the tax free haven but they’re things that the government’s doing so the other big one is making money easy to borrow your chapter is just done in the last you know month so the australian government is pulling every economic lever it has which might get us through this one but because interest rates when they get below 1% it becomes less effective to pull rates yeah and you know we set up for a bigger what’s already
less effective now than it was back when interest rates were much higher than 8% 6% etc and so a lot of people are talking about okay the australian government needs to do more monetary policy might not necessarily plus through this or as you said if it does it’s kind of kicking the can down the road for a future recession but yeah what we’re talking about in this video in this episode is is what’s being done today to try and avoid a recession because that thing we can talk about okay it does look like a recession is coming but then it’s okay the government’s gonna do everything they can to stop it and maybe successful in that
you know if this stage of the cycle which is sort of the middle it can be you know we might get a stock market crash we might get a technical recession which could last up to two years but it generally doesn’t absolutely smash people like the gfc did because there’s still these levers that they can pull in the economy it’s more when we get to the next top that everyone’s all in interest rates are low globally and there’s nowhere else to go so it’s perfectly setting us out and you know as ryan is going to talk about in a moment because pulling the monetary lever isn’t going to be as effective right now the next thing they start doing is spending all that surplus budget that they’re creating and all that money that they’re raising through iron ore and coal at the moment and that will all go on to infrastructure projects which i think there’s like 90 massive projects coming on next year in australia which will give you know take the unemployment rate from where it is now like almost 6% down to 4% in sligo yeah there’s hater cool shit happening which is epic
so yeah it’s very interesting to look at so let’s go through this article i will link up to it in the description down below if you want to go ahead and check it out yourself which i highly recommend number four on here this go for extra fiscal stimulus so the federal budget is nearly back in surplus and while we’ve had a long run of deficits our public finances are in good shape compared to the us europe and japan and so again
that’s not good because that’s pretty much the whole world with the best of a bad bunch of guys and so yeah
so there’s a little like dot map on there which i’ll overlay over the video or again i’ve linked up to that down below is the link you can ask where you can see in the low risk kind of portal australia is down there at the moment and so it’s saying some fiscal stimulus already on its way with the tax refunds for low and middle income earners and while the government’s focused on achieving a surplus it seems to be recognizing the case to do more to help the economy we talk about bringing forward infrastructure spending so again you’re talking about infrastructure and how many projects they are there’s more talk about bringing more projects forward as well and even upping the infrastructure spend looking which is the fifth one look at japan they’re like a
lot of people like why hasn’t japan sorted itself out because it’s government debt to public debt to gdp ratio which is what ray talks about is still sitting at 225% that’s that’s Like almost crisis setting like it’s, it’s crazy.
Yeah. And so yeah, it’s really interesting. Obviously, I’m sure economists will be able to do more with this than we can. This is more just bringing it to the normal, normal people out there like,
So I think, yeah, we want to be clear that we don’t like we don’t have a crystal ball. And we’re not saying that the economy’s not going to go into a recession. We’re just kind of looking at this sort of stuff and sharing it with you, as we learn.
I think the economy’s gonna go into recession. Like personally, well, just just throwing it out there. Like, I feel like, we’re going to run into a technical one soon in the next two years. But I’m not stressing on it, because I know it’s, I don’t think it’s going to be too bad. But
that’s the thing. I think when it comes to recessions, when it comes to an Australian recession, as well as global recessions, economists all focus on that, and obviously, widescale, it can have quite negative impacts on the economy, on households on people on social life and things like that. But when it comes to us, as individuals, it’s like, Okay, this sounds really interesting. It’s really interesting to talk about, but then we need to talk about, okay, what can you do as an individual to prepare for, in the case that a recession does hit? Or in the case that it doesn’t? How are you setting yourself up, because at the end of the day, if Australia goes into recession, I can still have a business that’s growing, I can still earn good income, I can still invest in property, if I put myself in a good situation. I love that man. Like, it’s like, what
can you do about it. And the reason I feel so comfortable with this is because prices in Sydney have already corrected by 18% 15% in Melbourne, 25% in Perth, 30%. in Darwin,
I think it’s less than that. It’s like 15 in Sydney, 10 in Melbourne, or 20. And
every single week, it’s like, who’s dying, we’re looking at, like sumc core logics there. But like, somewhere between 15 to 20%, in Sydney, and the rest of those markets, maybe said, Melbourne, but that’s, that makes me sleep good. It’s like Australian government saw an issue coming. And they made it really hard to get financed three years ago, so that we could get through like, imagine processor kept bubbling away. And, you know, we’re all feeling like that going into like a stock market crash and a bit of lack of business confidence all at the same time. It’s like, holy shit, that would have been like a train you would be wanting to get off. Yeah, but you know, like we’ve pulled up early. And, you know, it might affect business for a while it might affect jobs and unemployment for a bit, it might also affect the share market, but it might not, we might just, you know, luckily dodge our way out of it again.
Yeah. And so that’s another one in here. Number six is they say there’s no sign of panic property sign. So the spike the property markets going down, there’s no sign of a flood of properties to the market of an imminent crash that is coming. Because in a crash, obviously, you’ve got lots and lots of people trying to sell. And then so you’ve got all this stuff on market, and then you’ve got no one wanting to buy. And so then people are dropping their prices and competing with each other to try and sell Yeah, which then leads leads to the crash. And so what we’re seeing in Australia is not we’re not necessarily seeing that panic sign, and corelogic in their last monthly update in July, we’re saying that it seems like properties on market had kind of hit the floor. And that there’s not as many properties coming to market sales volume still aren’t as high as they had been. But it seems like the properties on the market have kind of hit a floor similar to what they were in the other downturns in Australian property.
That’s powerful, because you look at the like bank foreclosures or home loans in arrears like, which is effectively people that are paying late, or people that can’t afford to pay their mortgages. And I think it’s the lowest rate in Australia and 37 years right now, you know, that’s interesting for a number of reasons. But a lot of you know, it’s sad to think that if Australia was in a major problem from a personal debt perspective, that there’d be more and more people in arrears, which are behind on their loans, but it’s actually the complete opposite data right now.
Yeah. So obviously, if we go into a recession, though, and people are earning less money, then that flip. So that’s a good sign now, but that’s no guarantee for the future. So some other things here, as they say, the political environment remains sensible. So obviously with liberal get in there talking about, you know, that populist agenda, not necessarily coming through yet to kind of really unstabilized things
is cloud partners coming guys.
You know, they say maybe it’s a moderate climate, maybe it’s the lack of extreme inequality. Maybe it’s the compulsory voting system that keeps motivated extremists in their place in favor or in favor of a sensible center. An eighth one, which I think is a really big one to talk about is that population growth remains strong in Australia. And this is one of the reasons that we haven’t gone into a recession because if you look at GDP per capita we kind of are in a recession it is going backwards yeah but because we’re getting population growth and an influx of people into the country through migration then gdp is increasing as a whole because obviously those people are producing as well as consuming things
and that’s what made you’re so powerful for 400 years and that’s what made america so powerful for a couple 100 years it was just their population was growing it’s when developed countries like ours hit that population limit where we’re like okay no more that that oversupply of stuff that builds up to meet that population growth becomes absorbent and then we have the major problems
yeah well and that’s what you see i guess a miniature version of that in places like mining towns fish where you know there’s this huge influx of population growth so people build extra houses to house all these people and the mining shuts down everyone leaves and all of a sudden you’ve got this goes down with all these houses and no one living there
anymore think about that that is exactly how countries work they’re all mining towns but most of the time that the mining towns still open yeah it’s when the
mining town shuts we have a big problem so yeah so australia still has strong population growth and looks like it will continue to have population growth well into the future you
look at the like the australian government’s vision for australia by 2050 or even further yeah and within the next 50 years they’re expecting australia to be 60 million people so i don’t think that vision is close
so it’s saying that well far from a world beater because the top 10 countries by population growth has seen growth between three to 5% per annum we are at the high end of comparable countries and roughly double the oecd average in the us and the uk is faster than india
so we’re tracking compared to developed countries and when not not even close compared to underdeveloped countries
to some other countries and then they’re saying the ninth one is that the rba can still do more so the official cash rate is at a record low it can still go lower and we think like they’re saying that they think it will whereas in europe and japan it’s already at zero or even going into negative territory that
scares me like because those guys haven’t got it out of zero for last year say
well that’s i guess we’ve constantly gone down since the last year say as well yeah so we have i don’t think there’s been an interest rate rise has there since the last year so
yeah like i remember my interest rates when i first started in 2011 will like seven and a half percent i was like oh that’s a good rate if i could get 6.9 yeah and now it’s like i’m renegotiating rates at the moment at 3.2% and i think there’ll be another rate cut later this year
yeah so obviously there’s that reycarts and there’s quantitative easing which can happen as well like the government printing money to
australian government said that they’re going to start bringing on some inflation over the next few years like that doesn’t really do anything except trade more pain down the line but what it does do is artificially inflate the value of things so that incomes feel higher than they really are it’ll always just go straight back into asset prices
yeah so that’s one of the things with qe or quantitative easing or printing of money is that then inflate asset prices but doesn’t necessarily lead to a better quality of life for everyone out there it’s more wealth disparity long term but it’s good for people that own assets like stocks or property that’s something that’s good for the people who are already rich and who already have assets but for the people who are poor who don’t have any assets yet then it can be really bad for them yeah so yeah as you can see there’s a lot of things that can be done and are being done to stop economic recession happening in australia or to delay it as long as possible again we don’t have a crystal ball and i think what is going to happen is going to happen and while you know we can lobby and while we can do things i think at least for me personally i feel like this is largely out of my control as an individual i don’t know if that’s a terrible way to look at the outside of our control
it’s like there’s a system and we just need to understand the game yeah and play the game but you’re not going to change the rules of the game
i’ve been reading this book fake which is the latest book out by robert kiyosaki who wrote wrote rich dad poor dad just talking about like fake money in the system and how it works but also talking about yeah it’s fake money because it’s not backed by gold anymore but you still have to play the game and you’ve got to play the game of fake money in order to then purchase real assets like gold and silver or real estate or you know he talks about the people’s currency being cryptocurrency and stuff like that so it’s even though all this is happening and it does feel out of our control what we can control is our own lives and how we play the game of money and how we take advantage of the things that are happening in the economy and happening in the market for ourselves and for our families and try and set ourselves up as best as possible to take advantage of what’s happening, but then also to protect us and prepare us for if something bad does happen. Some people are going to be hit harder than others. And it’s up to it’s up to us to decide what do we do now? So that if that does happen, we’re one of the fortunate ones.
It’s so interesting, man, like, you know, I hope everyone’s enjoyed this. And it feels
like a horrible way to say, I want to be one of the fortunate ones. Like it sucks for everyone else, but it’s like,
you got to take care of your own. It’s like I was having this Convo with a mate on the weekend, right? Because for a long time when I was younger, like I had a negative view of money right like a lot of people watching this would have a negative belief whether they’re aware of it or it’s unconscious. If you’re not a millionaire, you’ve got a negative belief around money like there’s something stopping you from accumulating money because money is super easy to access. It’s just like anything else in life that if you know the the game, you know, there’s so there’s something there behaviourally or mindset was, would you just like I don’t mean to be an asked about that. But I think there’s a, you know, you’re either on your way to becoming one, or you’re self sabotaging all the way through, you know, I
think to become one to become wealthy, you need to constantly work on yourself and constantly improve
for sure. So like, there’s a lot of people watching this, myself included, that are growing like that have come from that type of mindset that are like, cool, I’ve sort of figured it out. Now, I’ve just got to wait 20 years to get there, you know, it takes time to become wealthy as well. But you know, what I’ve learned is that a lot of people, you know, don’t understand the system. And don’t understand that all that what all of these things mean, like to the average person like you and I is, every single one of these is going to artificially inflate the absolute eff out of asset prices, all of this cheap money, all of this stimulus, all of this easy money from Abra. All of these first time buyers grants, all of this infrastructure is going to go straight out of someone’s hands, and straight into asset prices. Now, that’s been happening for hundreds of years. And there’s absolutely nothing in there, or Ray’s book that hasn’t been happening for hundreds of years, governments around the world are getting better at learning from each other. And that’s why he wrote the book to educate policymakers on effective forms of action. So that that don’t push the self destruct button on the economy. So often, the reality is, all of this stuff is going to result in a massive asset bubble down the line. Some people that I follow is saying 2020 seats, who knows, like when it happens, but I can guarantee that all of this is going to result in a problem down the line, which is completely fine, because it problem looks like a big opportunity, too. But the sooner you can recognize that the system is inherently flawed, it makes certain people really wealthy, it makes certain people super broke. And it makes other people probably bankrupt at different times, like that is the system. And as soon as you recognize that, and what the what the labors are, like all of these things, then, you know, times to enter the market, and times to get the hell out of the market to protect yourself as well. Yeah,
well, it’s all about trying to understand the system so that you can work within the system as best as possible.
And even understanding it, I’ve been burned, I’m gonna get burnt again, without a doubt, like I expect every property that I own at some point down the line. And this is just being morbid, but I expect them in some year to drop by 40% over my lifetime. That’s cool. Because if I play the long game, and I’m getting great cash flow like you and I talk about, who cares if it goes up and down my life? My wealth, I’m just interested in the cash flow coming in to support my family and I hate I hate being like, dire. Like, I’m I’m such an optimist. And I know the future is going to be amazing. And I truly believe that asset prices are so cheap today compared to the where they will be in 30 years. We’ll all be looking back and going shit. Why didn’t I buy like 10 homes then? Yeah.
But there is a stress about it now and then we’ll move back on. Yeah, it’s like, if you look back on I know, you’ve got a book up there that’s from just after
the 1970s was
written in the 1970s. About just after that recession and talking about investing in property back then it had a
range of it, because we just come out of like one of the worst recessions in 100 years, and
I’m so sure people back then were freaking out as well, you know. And so, yeah, it’s very,
you know, it’s it’s learning to differentiate when there’s going to be big, big, big problem. And when there’s going to be just the problem. Yeah, because there’s always going to be problems in this system, because cheap money goes into the hands of people that don’t understand what they’re doing most of the time and that cheap money goes out of their hands and into the hands of the people that do understand it and as Ray Dalio Luckey openly says in his book, he’s like you’ve got more chance as a 55 year old 200 kilos overweight male of going to the Olympics and betting 100 meter sprinter cuz he’s he’s honest, like line for line, then you do betting our hedge fund and investing and he’s just So black and white, he’s like, I spend 200 250 million bucks a year on research, I get the absolute best people in the world. And he’s like, some years, we, you know, like, still don’t figure it out, you know. And it’s just like, he’s like, the game is inherently rigged in every way. So he’s like, you can try and beat it. Or you can just take the best advice you can and blend with the system. And when these big style events do come, like in December, for example, last year, when the stock markets around the world dropped by 15, or 20%, you know, that’s a good time to buy stuff, if you’re holding for the next 30 years, or when Sydney property prices in Sydney, come back in some suburbs, but 30% in the last few years, like that might have been a good time to go buy your waterfront mansion, you know, on Manly Beach, or something. But, you know, if you can’t afford to time the dip or buy the dip, then just playing the long game is what we’re both trying to do. Yeah, we’re trying to time it as well as we can. But we’re trying
to look at this sort of stuff and time it but then given how uncertain It is so uncertain that it’s like, okay, let’s have a plan in place that is going to work in both situations, in case it’s
bad for the rest of our lives. Oh, really good.
A plan that works in any market? Yeah,
well, that’s the thing, try and plan for Okay, the economy goes good, then we’ll tell you know, portfolios will do well, or if it goes bad, and we’re protected against the worst of that. And then as things change, and you get new information, and the market seems to be shifting, then it’s like, okay, now just my strategy slightly. So we are short on time. So we will finish out there. But we hope that this has been interesting talking about some of the reasons why Australia might not go into a recession in the near future, and also get you thinking about, okay, at the end of the day, whether or not Australia goes into a recession, what really matters is what you’re doing with your finances. Are you preparing for this? And are you setting yourself up in a good way? And so that’s something for you to think about today. Thank you so much for tuning in today. We absolutely appreciate your attention. Go ahead and check out Ben’s channel or subscribe to this channel. I’ll leave the links down below. Otherwise until next time, stay positive