So these articles has got me thinking whether Australia is heading towards recession
http://www.msn.com/en-au/money/markets/australia-is-running-…
https://www.theaustralian.com.au/nation/coronavirus-australi…
It would be interesting to see the opinion of OzBargain economists
@AlexF: I'm still seeing them whizzing around on those no-pedal electric bicycles with those square backpacks - delivering the virus hot (or warm after 20 minutes) to your door
@Hangryuman: The people doing food delivery on bikes are probably not affecting the housing market much, but they are not the stereotypical migrants of the current era.
The majority of migration to Australia is skilled migration. I work alongside migrants from Britain, Europe, India and other parts of the world. They have university degrees and are in decent white collar jobs. I'm pretty sure they could earn a good living in their original county. They are the type of migrant who is keeping the housing market buoyant.
In australia that's mostly set by the rate of immigration over the past few years.
Well that rate is zero now.
Perfect! So ….all we have to do is just close up immigration and the house prices reduces to…acceptable levels that we poor bastards can afford….
Look at asx200 stocks over the past month. Dropped around 30%. Definitely going into recession.
Hmm.Good point
I have a 60/40 portfolio, only dropped 10% overall from original investment, not including inflation losses, so in that case it would be like a 16% drop.
From peak I am down 25%
What is 60/40 portfolio. Can you please elaborate?
Is it 60 property and 40 shares.
60% stocks, 40% bonds
I have a 50/50 split for Aus/international stocks, just for simplicity. 50% of the international is currency hedged. I'm just following recommended financial investment literature.
International bonds are always hedged. Bonds are also 50/50 Aus/international
I like to take inflation into account for everything, to keep things realistic.
@Oofy Doofy: Technically it means 60% growth assets, 40% defensive assets. Stocks are growth assets but it could (and probably does depending on what ETFs you're in) also include things like property, alternatives etc. Bonds are defensive but it could also include cash, TD's etc.
We have very nearly been in a recession for quite a while. The impact of the fires, and now the impact of COVID19 will definitely push us into a recession - along with most of the world. The US stock market is doing MUCH worse than it was in the 2008 GFC, it's had its worst day of trading since 1987 - and that's possibly because extra protections were put in place after 1987 to prevent larger crashes.
Half the world is on hold at the moment, working in a reduced capacity while we see what happens next.
Not just Australia, the entire world is entering or entered into a recession.
Yes big time .
Yes.
Eat the rich.
Tall poppy syndrome. I've always wondered why people feel the need to hate those who've done well for themselves. The irony is that the "rich" are the ones who prosper during recessions - they either predicted this recession or were advised by others who had a reasonable expectation that it would happen. As a result, they liquidated at-risk-assets at or near the peak for the purpose of taking advantage of the depression we'll experience in the future.
Nobody hates the rich that have a low profile. They just hate those who rub other people's faces in it.
Well, it appears that zeggie hates the "rich" without prejudice. Also, I wasn't rubbing anything in anyone's face, I was merely pointing out to zeggie that his hate for "rich" people is probably misplaced since many astute investors would have avoided this predicament. In fact, if you read my comment on the next page, you'll note my particular distaste for caromellokoala's post at the start of this thread. I'm genuinely concerned for all Australians - this will be a particularly devastating period for millions of people and that's nothing to relish in, irrespective of how rich or poor those people are.
… the need to hate those who've done well for themselves.
Well perhaps they haven't done it just by themselves but by exploiting others. Like certain restaurant owner and TV personality who now cries poor …
Very few people "hate" a lottery winner. Because she/he got the money without actively doing anything "questionable" to others.
So people who've done well for themselves by employing others and paying them in accordance with the relevant regulations are exploiting people how? People who run businesses which provide revenue streams to other businesses who employ yet more people is exploitative? You've got a myopic and warped view of exploitation.
@gyrex: No, you deliberately obtuse muppet. People who get rich while still looking out for their employees well-being are never the target of ire.
People who build their fortunes on exploiting people - e.g Gerry Harvey, Gina Rhinehart, all the Murdochs (except for maybe James); they're a different story & fully deserving of being eaten.
If you're commenting on this site and you're an Australian, you are already the world's 0.01% - your riches will see you eaten too. Careful what envy you stir up.
Yes. I was wondering how it would happen. Australia has been playing jenga, hollowing out itself in order to race to higher heights. The ground has had a little shake, everyone has jumped in surprise, and now the tower is starting to lean.
You like I have been looking at the hole index. The massive number of holes in Western Australia. Half of Australia is in China by now.
I see you're taking a holistic view
It's interesting that it was only a few years ago we were talking about "bullshit jobs" (https://www.thedailybeast.com/nearly-half-of-you-reading-thi…) on OzBargain. Shame you're not meant to socialise too closely with all the free time a lot of us will have.
to get "bullshit jobs" you have to be standing in the far queue - looks like we're almost there now
We have been in one for a long time. This virus scare has shown how vulnerable we are.
Immigration, Baristas and Chineae students do not make an economy that has any ability to stand any kind of shock.
Reminds me of perhaps the best comment I have ever read on the internet. "We cannot all get rich by selling overpriced houses and lattes to each other".
This is silly and is often mentioned in forums frequented by gen z who don't have a good enough understanding of the Australian economy. Have you heard of FMG, CSL, food exports, mining etc….. Houses are only expensive in Sydney and Melbourne because most of the world would love to live there.
'Houses are only expensive in Sydney and Melbourne because most of the world would love to live there.'
y'all can find cheaper houses in Mississippi where median home value is US$127,159 - https://www.zillow.com/ms/home-values/
but 'median household income for Mississippi was US$43,529 in 2017, the latest figures available. Compared to the median US household income, Mississippi median household income is $16,807 lower' - https://www.deptofnumbers.com/income/mississippi/
house prices tend to be associated with incomes and lifestyles of the rich - in outer woop woop they're reel cheep but would you want to live there ?
Is Mississippi as desirable as Sydney or Melbourne?
How much are apartments in Hong Kong and Manhattan
Look at it this way, would you rather start a business now or one year ago. Yes, we will be in recession, guaranteed. Australia is more exposed than other countries due its large service sector. Retail is dead. Restaurants are dead. Tourism is devastated.
"· The services sector makes up a large part of the Australian economy, representing over 70 per cent of Australia's gross domestic product (GDP) and employing four out of every five Australians."
The question isn't whether we hit recession, it's whether the house prices will burst as a result.
The industries that Australia lacks - manufacturing high value goods from raw materials- would suffer the most in a recession.
They carry a burden of high setup costs and high debt.
Service industries will contract, but could also recover quickly. We are still the lucky country
'whether the house prices will burst as a result'
I've read that since the GFC destroyed house prices in the US, big corporations have bought up hundreds if not thousands of houses which they now run as a pure-profit-making enterprise - attracting poor tenants to pay bonds, etc., while not repairing so tenants suffer and complain, then evicting them for complaining, and keeping their bond for the slightest infraction or late payments
that kind of friendly thing - you know - helping the poor - to end up homeless or in prison - where the free food and accommodation only costs the taxpayer an average of $300 a day per person ? - paid to private corporations like Securicor … https://en.wikipedia.org/wiki/Australasian_Correctional_Mana…
'In Australia in 2015, the cost of putting one person behind bars for a year was nearly $110,000. The OECD average was $69,000 per person' - https://www.ceda.com.au/Digital-hub/Blogs/CEDA-Blog/July-201…
The house prices will burst only when 33% of the population in the big cities decides to move out. Until then, dream on.
A housing price busy requires waves of sellers. For waves of sellers, there's gotta be somewhere else to go. I looked outside and there aren't many better places to weather GFC2.0 and Wuhan Coronavirus. No one will sell unless there's somewhere better to go and in that case the whole world would be in the toilet anyway.
It's made the landing easier. Now we can blame the flu
The economy is about to take a massive hit
I work in health care but I'm a physiotherapist in the private sector I've had a huge reduction in clients due to mostly elder patients fear of going out and contracting COVID 19
However a lot of Australians are going to struggle in someway or another this virus is going to affect us all
How will your industry be affected?
Will the drop in the share market ripple into the property market?
I have never lived though anything ike this has anyone else?
https://www.news.com.au/finance/economy/australian-economy/c…
Buckle up for a long globe recession probably the worsted if you planned to retire because of the major losses to super
I was talking to my super fund yesterday as I moved my investments over to cash (yes i know a little late to do so but now is better than later), can you believe they were telling me they dont think there is going to be a financial crisis. Im not sure if they watch the news.
By moving your money, you create a catch 22, the more people that move from shares to 'cash' the more these share funds have to 'sell' shares, which drives the price down. The more people freak out by the dropping share market and more move to cash etc, creating a death loop.
@JimmyF: Perhaps then it would have been better for financial markets to freeze trading for a period of time. Its completely reasonable for people to want to protect their money in times like this.
@klonky: Yes and No to freezing, some companies will also 'dip' during events like this, aka airlines.
Its more of a people thing, stop freaking out and pulling money out, as it drives the shares down.
The same fund that told you to get out at the peak? Don't listen to them.
ouch. And how are you going to guess when to change back? You will lose another big chunk on the recovery.
I'd prefer to just not look at my super for 10 years, rather than lock in a loss plus have my super eroding in cash.
On the bright side, if you jump back in while it's still falling you'll be ahead, and you can always say you were just a bit early on catching the ride back up.
@SlickMick: This is a unique situation and is being driven almost entirely on news of the virus. I absolutely guarantee the time to switch back will be once a vaccine has been declared successful in trials, just watch the market bounce.
the worsted if you planned to retire because of the major losses to super
Private sector fails again.
Public sector is immune.
Before retirement I worked for a long time in retirement incomes and superannuation policy. Worldwide the neoliberals pushed people into defined contribution (DC) schemes, where all the investment risk is borne by the individual. Defined benefit (DB) funds were always seen as a bloody imposition on either companies (for private funds) or governments (for state funds). I always argued that this was simply wrong as funds and governments are much better able to bear this risk than individuals because they can effectively reinsure where individuals can't.
Sadly I'm about to be proved right. But at least my own scheme is a DB one.
'Buckle up for a long globe recession'
was discussing with a neighbour yesterday - what's the likely result of this
and with my history major I thought - a whole lot of angry unemployed … who do they turn to … a ‘strong leader’ demagogue who 'says what they're thinking' and promises to 'drain the swamp' - like Hitler
if that unfortunate possibility comes true, expect roaming gangs of thugs blaming and bashing up individuals of minority groups - on the way to WWIII …
And it is just getting started.
A Million Jobs to Go
A million deals to come to ozb
I understand your issues and they are very worrying for you and others, but really how is another post on how everyone is going to be affected, help.
If anything all these just raise the concerns for everyone, and this economic virus keeps multiplying faster than the virus itself.
Jobs will falter because of the impact of the pandemic.
The greater the pandemic, the greater number of job losses.
What people seem to be forgetting is also, the greater the pandemic, the greater the opportunity for innovation and industry after the pandemic. Post major global events, ie. WW1 and WW2, the world entered economic expansion.
Whilst the majority of users here wallow in despair, there are some that see the need to prevent a recurrence of this event. This is where a new industry will start. If anything, this has woken not just Australia, but the entire world, to the need to have decentralized manufacturing and food production, resource redundancies on a personal level and the need for enforceable borders.
Surely someone somewhere can make something out of these needs that will both benefit themselves and contribute to the economy.
I like the positive angle on this. Someone asked me today what I thought the long term outcome of all this would be, and I said
"hopefully the realisation that equitable access to healthcare is crucial in the modern interconnected society. Don't defund Medicare etc".
@ozbjunkie: My hope for the long term outcome is that everyone finally washes their hands properly and stops hugging, kissing and shaking hands as a form of greeting between non close contacts.
@lainey13: I understand the hand washing but everything which follows would create a horrible, unconnected world in my opinion. Don't ever travel to Italy.
Or a major political move towards the left…
'Surely someone'
The old can't someone else do it
Here is the thing to be creative or innovative it take 3 things ideas (no shortage of them), brilliant hard working people (probably a few of them around) and a lot of money (not a lot of that around)
Look at the diesel engine as a prime example of innovation but a lack of $$$
How good is a recession?
Must be OK, sometimes we 'have to have them'. The 80's government told me so. Though I'm not sure if we've ever seen a really global recession/depression. Even the 1929 one was 'mostly' affecting the U.S. as countries still had autonomy and self-reliance back then. Not any more though and I suspect things will be MUCH worse than they might have been if globalism wasn't allowed to take off the way it has. Too late now though. Going forward I like to see more local manufacturing and industry and food production to offer some hope of protection from future events. Can't see it getting any support though.
1929 one was 'mostly' affecting the U.S.
Really?
From wikipedia
The Great Depression had devastating effects in both rich and poor countries. Personal income, tax revenue, profits and prices dropped, while international trade fell by more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as high as 33%.[6]
You might want to take advantage the downturn and update your economics library
@RockyRaccoon: '1929 one was 'mostly' affecting the U.S.'
my reading of history was that Australia as a primary producer (wool and wheat) was not so much affected by the share market crash in 1929 - until about 1932 when it most affected Australia - the Hungry Mile - soup kitchens for the unemployed, etc.
"countries still had autonomy and self-reliance back then"
Most economic historians believe it was exactly the attempt to get autonomy and self reliance which killed world trade and converted a US depression into a global one. Eg google "Smoot-Hawley".
Australia could keep its over sold economy if they actually were testing everyone and honest about it. But no. I wont be supporting them any more. Does anyone know which political parties are best against pandemics?
Mate, Labor, of course.
Great, what are their policies on the pandemic or link to it?
@orangetrain: They're in opposition - they don't really have policies on pandemics. But you've seen how the LNP have handled this pandemic (very slow tor react), you think Labor would have performed worse? A political party with strong social well-being and union ties?
@ThithLord: Yes those unions are what we need in a pandemic…
Nek minit - hospitals shut down after negotiation for healthcare workers payrise falls apart.
@[Deactivated]: Unions negotiating sickpay for the over-casualised workplace due to LNP policies, perhaps, TShow?
@ThithLord: Perhaps.
Whatever it is, unions do not help emergency scenarios. The primary purpose of a union is to negotiate for better conditions/pay, and the leverage is stopping the industry through mob sentimentality.
So, your opinion that union ties is going to be a net positive in a pandemic scenario is… confusing at best.
@[Deactivated]: My point was Labor is the best suited political party to deal with this pandemic - who the hell else would it be? It certainly isn't the LNP, or any independent parties. They have a strong focus on social well-being, they don't gut public health services.
So, your opinion that union ties is going to be a net positive in a pandemic scenario is… confusing at best.
If we're only talking about containing a pandemic, not the extremely broad implications of a pandemic, you may have a weak point. Orangetrain may have only been referring to that - in that case, my B.
@ThithLord: We will never know. So its all speculation. As you said they are in opposition, they can just go along for the ride, and wait for a mistake by the government. Thats what all oppositions do.
@ThithLord: Labour has been good at spending money, which is what is required now.
Unfortunately they suck at funding their expenditure.
The support proposed to small businesses this time seems like a much better idea than forking out cash to those many of which are prone to spend it unwisely (I hope the latter plan has been scrapped??)
Hopefully this will put the Housing Market back where it should be. Been waiting for this for years, we had it coming and people who think i'm an arse for saying so. Maybe those people shouldn't have gambled on property, because that's what they were doing, being GREEDY and hopefully it comes back to bite them.
It's a shame, legitimate home buyers who were not looking to "FLIP: and move up the ladder will be caught up in it.
I get where you are coming from as someone who is a owner occupier with a big ads loan and a young family I hope you are wrong…
I think owner occupiers will be ok, its the slumlords with multiple investment properties that need a trim. good luck paying your 50k repayments per month on 10 investment properties when your tenants will buy food over paying rent, yeah it will slash probably 20-30% off the value of your house but the bank won't throw out a family to the curb
@monkeyfood: I don't think any of my tenants are derogatory towards me like some here are. And I don't think slumlords are going to reduce their rent - or are you waiting for developers to come on the market and provide a glut of rental properties to choose from?
If a person wants to leave the rental market and buy a house, good on them. But some people want to rent and they appreciate these "greedy, illegitimate slumlords" providing housing for them.
@SlickMick: yeah the appreciate being priced out of owning their own property because somebody with 10 has much more buy buying power then a first home buyer. Just like the desperate buyers "appreciate" buying toilet paper for $2 a roll from scalpers, have to justify it to yourself somehow
This will only happen if the mortgage payers are unable to work from home (as in use all their leave and cant get paid) or unfortunately lose their jobs. People would need to start going bankrupt for a housing correction which I hope does not happen.
It could happen if we fail to contain this pandemic and it goes on well into the months rather than weeks.
@[Deactivated]: Honestly unless there is a medical solution things won't be back to normal for years.
Even if we get control of the virus in Australia the rest of the world will be full of infected people, how will tourism function?
I haven't waited. I've been able to help most of my family get into affordable housing over the last 15 years. I have 2 more I want to help, so yeah cheap houses would be great. Call us greedy, call us illegitimate, but property investors would love cheap prices, and we won't be waiting for you, sorry.
property investors, toilet paper investors whats the difference
Will the drop in the share market ripple into the property market?
If the economy is going to go crap anyway, then at least this will be one "positive" to come out of it, if it means this obsession with this ponzi scheme comes to an end and houses are no longer worth pumping money into for cash-cow or tax break purposes. Back to being a home, or if as investment mostly about rental income.
(I'm not directly saying the goal is specifically a price crash even though that might happen, just more the fact some people if they need funds will be forced to sell their ridiculous excessive portfolios)
Have you ever considered how profitable it is to be a landlord, and how high rents would need to be if there was no capital gains expectation?
Squeaky wheels have successfully convinced the tax office to make property investment less attractive, but I don't believe it's a good move.
I see a future where they'll be crying for rent control because no one can afford the rent in capital cities.
then nobody will rent in the cities and the greedy have to get a real job instead leeching from the poor
Why would immigrants come to Australia to become unemployed or underemployed?