Recession is looming, and Australia needs to be ready
Good things certainly don't last forever.
Australians have lapped up a record-high ASX200, rock-bottom interest rates and soaring house values of their homes. But these good times had to hit a road bump at some point, and this time we've hit a big fat one.
Right now the economy is in dire straits.
The deadly coronavirus epidemic has put a massive spanner in the works and sent global markets into a tailspin. Wall Street plummeted after having its worst single-day drop ever on record on Monday, while the ASX200 saw a massive $137.1 billion was wiped off the value of our top companies. This fall of 7.3 per cent is its worst single-day demise since the Global Financial Crisis in 2008.
The coronavirus fears are spreading like wildfire across the globe and now Australia is facing the very harsh reality of entering a recession.
The Reserve Bank of Australia governor Dr Philip Lowe cut the cash rate to a record low of 0.5 per cent this month, and experts are strongly predicting another cut next month. But in reality, there's not much lower they can go until the nation opts to enter quantitative easing - when the central bank buys government bonds to help bolster money supply and hopefully stimulate the economy.
It's never been done in Australia, but it has been done in Japan, the US and Europe in the last two decades with differing levels of success.
While rock-bottom interest rates is fabulous for Australians who are paying down their owner occupier debt, it's the complete opposite for those who don't have a mortgage and are relying on returns on bank deposits.
Don't bother tucking your cash in the bank in the hope of getting decent returns, they've started slashing their savings rates, some are a paltry 0.01 per cent.
And unemployment climbed last month, from 5.1 per cent to 5.3 per cent.
Many of us are worried about our jobs, with businesses in all sectors cutting costs, that ultimately means cutting jobs.
So it's times like this where it's never been as important to make sure you are in a good financial position. But for some people, this might be a little too late.
Aussies have taken on far too much debt - we have the second highest household debt levels in the world behind Switzerland. We paid stupidly-high prices for houses, have signed up to ridiculous-sized mortgages and put our household budgets under pressure.
Many of us thought our house prices would keep going up and up, but these prices can't climb in the direction and at the pace they have forever, it's simply not possible.
And for too long we've relied too heavily on credit. At some point, this is going to catch up with us.
Now in the face of another recession, it's critical Australians keep their finances in check and bunker down when they need to should things take a turn for the worst.
This is why having a buffer on your mortgage - if you have one - is critical, and why having a secure job is worth its weight in gold.
Whether you like it or not, the coronavirus is having an impact on each and every one of us.
The economy is going through an incredibly tough time and has prompted the Federal Government to roll out a $10 billion stimulus package.
It looks like the surplus the Government hoped to deliver has also now gone out the door. But between drought, bushfires and the coronavirus, this can't be helped.
So hold onto your hats, we are in for a wild ride ahead.
Sophie Elsworth the national personal finance writer for News Corp.