On the ABC’s 7:30 Report on Wednesday night, Economist Associate Professor Steven Keen gave the following prediction for Australia this year:
“Best case scenario is a recession more severe than 1990 and lasting one and a half times as long.
Worst case is something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade.”
(Read the full interview here)
Earlier that morning my esteemed colleague Bill Milburn had enlightened me as to the technical difference between a recession and a depression:
A recession is when your mates lose their jobs.
A depression is when you lose your job.
Following are some tips to help you place yourself in a stronger position should we enter a recession.
Repay Debt Faster
If a recession hits you are probably going to need to pull in your belts just to continue to meet the minimum debt repayments.Get a head start and build a substantial buffer by boosting your repayments now.
It is when you fall behind in repayments that the banks will start to repossess your car, boat and house. If you are ahead in your repayments that will give you a buffer if your income stops temporarily.
If you recently locked in a fixed interest rate on your loans and that now seems high in the current environment consider refinancing to a lower rate and a more flexible package. Check the break fees before doing so and include them in your cost/benefit analysis.You will have more options if you refinance now while you appear to have a more secure income and before your property value has plummeted. Don’t wait until both you and the lenders get even more nervous.
If you do achieve a lower interest rate keep your repayments at the same (or even higher) dollar level to help you build a substantial buffer.
Secure Your Income
Twenty per cent unemployment sounds really bad. But remember that means eighty per cent are employed. So make sure you are one of the people who keep their job.Ask yourself what you can do to ensure you continue to be of massive value to your employer. How do you ensure that you only lose your job if your employer goes broke? What can you do to help your employer not go broke?
- Can you be more personally productive by improving personal systems and eliminating personal waste?
- Can you increase your expertise by completing additional, relevant and valuable professional development?
- Can you help your employer win new (unexpected) business and retain existing business?
- If your industry looks to be hit hard (e.g. retail) can you up-skill now and be prepared to change to a more robust industry?
Ensure you are very employable to both your current and other employers, so that if you do lose your job you don’t lose your income.