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Speaker 1: Hello, my name's Santasha Nabananga Bamblet. I'm a proud yr

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Speaker 1: the Order Kerni Whoalbury and a waddery woman. And before

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Speaker 1: we get started on She's on the Money podcast, I

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Speaker 1: would like to acknowledge the traditional custodians of the land

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Speaker 1: of which this podcast is recorded on a wondery country,

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Speaker 1: acknowledging the elders, the ancestors and the next generation coming

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Speaker 1: through as this podcast is about connecting, empowering, knowledge sharing

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Speaker 1: and the storytelling of you to make a difference for

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Speaker 1: today and lasting impact for tomorrow.

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Speaker 2: Let's get into it.

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Speaker 3: She's on the Money, She's on the Money.

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Speaker 4: Hello, and welcome to She's on the Money, the podcast

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Speaker 4: for millennials who want financial freedom. Recession is a word

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Speaker 4: that has lots of negative connotations tied to it. For me,

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Speaker 4: it custs my mind right back to the global financial

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Speaker 4: crisis of two thousand and eight, which we know was

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Speaker 4: a terrible time for so many people, so hearing that

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Speaker 4: there is one on the horizon is frankly pretty damn scary.

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Speaker 4: To help us all feel a little less afraid, today,

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Speaker 4: we're breaking down exactly what a recession is and what

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Speaker 4: it might mean for you, my name is georger King

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Speaker 4: and joining me as she does each and every Wednesday, is,

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Speaker 4: of course, Miss Victoria divine. Can you please provide us

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Speaker 4: a little context as to where things are at right

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Speaker 4: now and why we're dedicating today's episode two recession.

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Speaker 2: Oh you got me on.

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Speaker 5: The podcast today so that I could fearmonger our entire

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Speaker 5: community into being absolutely petrified of what a recession is.

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Speaker 4: Right, You're gonna make us feel excited and happy.

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Speaker 5: I never get to have fun on this podcast, all right. Well,

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Speaker 5: at the end of the day, I've said it a

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Speaker 5: few times, we from my perspective, are headed towards the recession.

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Speaker 5: And I say that because we have all the indicators

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Speaker 5: of a recession. We have an increase in cash rate,

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Speaker 5: we have, you know, a falling property market. We know

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Speaker 5: that the share market has recently, as in in the

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Speaker 5: middle of June, which I say is recent, turns out

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Speaker 5: it was a while ago, because guys, it's August.

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Speaker 2: It has been a few months since the middle of June.

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Speaker 5: And in the middle of June, we know that the

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Speaker 5: share market officially became a bear market, which, for those

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Speaker 5: of you who haven't listened to our bear market episode

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Speaker 5: means that the share market has dropped a minimum of

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Speaker 5: twenty percent from its twelvemonth high, so that can be

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Speaker 5: really stressful. And at the end of the day, we've

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Speaker 5: just gone through COVID, which is really significant, and there's

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Speaker 5: a whole heap of indicators that are telling us that

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Speaker 5: we are headed that way. Interestingly, though, I said before

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Speaker 5: we started recording this to you, Annanna Lisa, our producer

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Speaker 5: for those of you who are following along at home,

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Speaker 5: an absolute legend.

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Speaker 2: You should meet her. But I was saying before that

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Speaker 2: Goldman Sachs, which is a very big investment bank and

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Speaker 2: you know financial institution in the US, sees a twenty

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Speaker 2: five percent chance of a recession in Australia over the

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Speaker 2: next year and a thirty to thirty five percent odd

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Speaker 2: of it happening in New Zealand, while cautioning that a

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Speaker 2: sharp US downturn would lift those probabilities to fifty or

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Speaker 2: sixty percent. And you guys both were like, oh, I

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Speaker 2: thought it was like eighty or ninety percent. We did, Yeah,

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Speaker 2: that's actually a lot.

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Speaker 5: Guys like, there's twenty five percent. Hey, hey, George, let's

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Speaker 5: play Russian Roulette. We'll spin a gun, twenty five percent

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Speaker 5: chance you'll be like, oh, that's pretty hard.

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Speaker 2: Just one in four. It's one in four like that.

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Speaker 2: In musition, it's quite high.

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Speaker 5: But as a financial advisor, all the conversations I'm having

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Speaker 5: with our you know, investment brokers and all of the

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Speaker 5: connections that I have are, yeah, we're heading towards this.

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Speaker 5: You know, you can't actually predict a recession, which kind

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Speaker 5: of sucks, but we're all heading towards it. And even

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Speaker 5: if we don't end up in an official recession at

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Speaker 5: the end of the day, George, we've been talking about

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Speaker 5: it a couple of weeks ago. We talked about it

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Speaker 5: on our Friday Drinks episode. We're stressed, our budgets are

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Speaker 5: really stretched thin. None of us are feeling good about it.

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Speaker 5: There needs to be some kind of reset. That's what

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Speaker 5: a recession, unfortunately does, as long as it is a

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Speaker 5: time of you know, quite significant economic downturn, which means

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Speaker 5: some pretty negative stuff happening, and yes, people will lose

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Speaker 5: their roles and it can be really upsetting. The end

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Speaker 5: of the day, it's kind of like an economic reset

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Speaker 5: in a way, and it's something that needs to happen.

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Speaker 5: So our economy can keep moving forward.

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Speaker 4: Okay, we're going to get deeper into that coming up V.

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Speaker 4: But just to be really clear, what's the definition.

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Speaker 2: Of a recession? How do we know what it actually is?

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Speaker 1: Right?

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Speaker 5: So, if you googled it, George and said define a recession,

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Speaker 5: it will come up and say, in economic terms or

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Speaker 5: recession is a business cycle contraction where there is generally

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Speaker 5: a decline in economic activity. Recessions generally occur when there

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Speaker 5: is a widespread drop in spending. So you kind of go,

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Speaker 5: all right, that makes sense, like we've had to drop

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Speaker 5: in spending. COVID has forced people to have a drop

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Speaker 5: in spending. But also think about it, if cash is

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Speaker 5: going to be costing us more, our mortgages are costing

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Speaker 5: us more, what are we.

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Speaker 2: Going to do cut back exactly?

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Speaker 5: So it kind of just makes sense that we're headed

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Speaker 5: that way based.

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Speaker 2: On the definition.

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Speaker 5: But to be honest, there is not one single definition

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Speaker 5: of a recession that meets the criteria of what's happened historically,

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Speaker 5: because every single recession has been different. So if you

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Speaker 5: think of the Great Depression that was a recession, you

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Speaker 5: think of the Global Financial crisis that was a recession,

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Speaker 5: this one is going to be you know, it has

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Speaker 5: same indicators and markers, but at the same time the

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Speaker 5: situations are so different that you can't really define it

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Speaker 5: as this is going to happen because you also can't

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Speaker 5: predict it. Yes, we can see some indicators and we're

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Speaker 5: going towards that, but it's kind of like doing an

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Speaker 5: MRI and some things showing up oddly and you go, oh,

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Speaker 5: that needs some more clarification or we need to look

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Speaker 5: more deeply into that, because there's so many more tests

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Speaker 5: we need to do, but we're at that point where

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Speaker 5: there's not many other tests that could tell us and unfortunately, Yeah,

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Speaker 5: that's where we're at.

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Speaker 2: My Georgia King yay.

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Speaker 4: Interesting just from a language perspective that we had the

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Speaker 4: Great Depression, the word depression is there, we had the

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Speaker 4: global financial crisis, the word crisis is there. What's it

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Speaker 4: going to be for this little missy that's coming our way?

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Speaker 2: I don't know. I hope they come up with a

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Speaker 2: cuter and less dramatic name.

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Speaker 4: Yeah, they need to work on their branding.

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Speaker 2: Year, they need to really work on their branding.

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Speaker 4: They So you mentioned there are many different ways of

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Speaker 4: defining a recession. There v what exactly are they? Sadly,

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Speaker 4: So let's start with a technical recession. So technical recession

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Speaker 4: is obviously that most common definition. It's used in the

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Speaker 4: media as a technical recession where there have been two

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Speaker 4: consecutive quarters of negative growth in the real GDP, and

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Speaker 4: that definition often appears in textbooks and it's widely used

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Speaker 4: by journalists because, to be honest, it is the easiest

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Speaker 4: definition of a recession to find. So be this technical recession.

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Speaker 4: Correct me if I'm wrong, but I feel like it's

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Speaker 4: ringing some bells from when we were at the very

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Speaker 4: start of the premier twenty twenty twenty, I feel like

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Speaker 4: we were in a technical recession.

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Speaker 5: So a lot of us actually just buried our heads

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Speaker 5: in the sand. I've actually enough to fe.

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Speaker 2: A lot out.

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Speaker 5: But you're right, we were technically in a recession in

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Speaker 5: un twenty twenty, So Australia was officially in its first

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Speaker 5: recession for almost thirty years, with the June quarter GDP

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Speaker 5: numbers showing that the economy actually went backwards by seven

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Speaker 5: percent and was the worst fall on record and slightly

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Speaker 5: worse than most economists had actually predicted. So again, we

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Speaker 5: can't predict this stuff, so yes, we were in a

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Speaker 5: technical recession because of what was going on. But you know,

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Speaker 5: we came back from that pretty quickly. We didn't slip

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Speaker 5: into that full recession period of time. I mean, it

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Speaker 5: was still a bit of a what would you call

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Speaker 5: it a circus. However, I think that's a really good

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Speaker 5: pull up. At the end of the day, we were

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Speaker 5: technically in a recession and now we are worried about

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Speaker 5: heading into one again. Recessions, I feel like people are

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Speaker 5: really dramatic about them, obviously for good reason. Please don't

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Speaker 5: get me wrong, I'm not downplaying how impactful they can be,

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Speaker 5: but people think that they last for years and years

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Speaker 5: and years.

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Speaker 2: What's the average period of time that a recession last?

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Speaker 2: For George King, it's eleven months, all right.

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Speaker 5: I'm glad I had this conversation with you off air,

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Speaker 5: But I think the average Joe would say, oh, full

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Speaker 5: of years this that the other like. They wouldn't think

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Speaker 5: that it's literally less than a year that a recession

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Speaker 5: usually lasts in saying that how long it impacts a

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Speaker 5: community could be way longer than that, because I mean, George,

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Speaker 5: if we lost our jobs and couldn't work and then

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Speaker 5: we're trying to get back into a workforce where it

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Speaker 5: was quite competitive. That is going to last longer than

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Speaker 5: eleven months. The next is a sustained period of week

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Speaker 5: or negative growth in real GDP, which is called output,

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Speaker 5: that is accompanied by a significant rise in the unemployment rate.

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Speaker 5: That's another definition for a recession. So many other indicators

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Speaker 5: of economic activity are also weak during a recession. For example,

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Speaker 5: levels of household spending we talked about before you're going

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Speaker 5: to lack, maybe tie your purse strings a little bit tighter,

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Speaker 5: and then investment by businesses is usually low during that

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Speaker 5: period of time. In addition to that, the numbers of

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Speaker 5: households and businesses that are unable to pay back loans

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Speaker 5: are usually unusually high, and a number of businesses unfortunately

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Speaker 5: will close down. So that's not that fun. But then

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Speaker 5: if we look at the unemployment based definitions, which I

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Speaker 5: think are really important because at the same time as

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Speaker 5: talking about, you know, the share markets, and I want

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Speaker 5: to say, I don't have a lot of sympathy for

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Speaker 5: people who are worried about the share markets. And I

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Speaker 5: don't mean that in a really harsh way. I mean

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Speaker 5: it in a you need to be better educated because

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Speaker 5: this is a period of time where you know, on

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Speaker 5: she's on the money. Literally the last three years I've

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Speaker 5: been harping on about there are ebbs and flows in

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Speaker 5: the market. Sometimes you're going to be like, gee, I

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Speaker 5: got seven percent return this year.

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Speaker 2: That's sick.

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Speaker 5: Sometimes you're going to have a negative return. That is

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Speaker 5: a period of time that we are about to go

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Speaker 5: through or could very likely go through. And that's where

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Speaker 5: we kind of need to have our wits about us,

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Speaker 5: not make emotional decisions, and not be so worried that

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Speaker 5: when our share portfolios start to downturn we pull that

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Speaker 5: money out, because, as we've said a million times on

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Speaker 5: the podcast, the only way you lose money in shares

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Speaker 5: during a period of economic downturn a couple of them. Actually,

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Speaker 5: I need to be a little bit more specific. I mean,

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Speaker 5: the business that you own could absolutely go bankrupt, and

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Speaker 5: you're absolutely, you know, in a bit of a pickle, George.

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Speaker 5: That's why we diversify and never put all of our

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Speaker 5: eggs in one basket.

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Speaker 2: But one of the.

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Speaker 5: Most common reasons people lose their money during a recession

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Speaker 5: if it is invested, is because they make an emotional

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Speaker 5: decision to pull their money out when it's valued at

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Speaker 5: less or their shares out when it's valued at less,

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Speaker 5: and they crystallize their losses. You don't crystallize a loss

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Speaker 5: if you don't trigger a sale. So that sounds quite

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Speaker 5: I don't mean it to be so complicated, but essentially, Gee,

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Speaker 5: if you've got a share today that is worth one

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Speaker 5: dollar each, and you've got ten of them, you woke

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Speaker 5: up tomorrow and you're like, oh my gosh, Victoria, I'm

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Speaker 5: so stressed. I looked at my share port folio. It's

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Speaker 5: now worth five bucks. You still have those ten shares.

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Speaker 5: What you're doing is accepting five dollars for the sale

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Speaker 5: of those because you're anxious and need to get out

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Speaker 5: of it. Whereas if I'd sat you down and said,

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Speaker 5: all right, g do you actually want to sell ten

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Speaker 5: of your shares for five dollars when you paid a

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Speaker 5: whole ten dollars for it? Or do you want to

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Speaker 5: wait for the market to recover and you'll be like,

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Speaker 5: all right. Makes a bit more sense if we put

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Speaker 5: it in perspective. And something I've been seeing all over Instagram,

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Speaker 5: which I love and I've quoted on the show before,

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Speaker 5: is if in doubt, zoom out, stop looking at what

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Speaker 5: today's returns are Stop looking at the last month or

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Speaker 5: even the last year.

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Speaker 2: Zoom out.

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Speaker 5: Look at the last five years in the share market,

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Speaker 5: Look at the last ten years. If you want to

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Speaker 5: feel really secure, look at the last thirty years the

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Speaker 5: Australian share market. If you look at any thirty year

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Speaker 5: period of time in the Australian share market never had

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Speaker 5: a negative return. If you look at it in a

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Speaker 5: thirty year chunk, that makes you feel so much more

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Speaker 5: secure about things like your superannuation, right because if I say, Gee,

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Speaker 5: how much more time have you got your super invested for,

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Speaker 5: you go, oh, Lenny, plenty of time. But if you

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Speaker 5: looked at it tomorrow and didn't have an education about that,

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Speaker 5: you'd be like, oh my gosh, Victoria, I'm so stressed.

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Speaker 5: Should I switch it to cash? And if you switch

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Speaker 5: your super cash, what are you doing crystallizing a loss

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Speaker 5: and you're switching that money into a cash option so

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Speaker 5: that you can quote, I'll invest when the market a

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Speaker 5: better cool, but you won't be able to afford as

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Speaker 5: much as what you had before if you're investing at

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Speaker 5: a different time when the markets make you feel more comfortable.

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Speaker 5: So education is the most important thing that we can

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Speaker 5: have when going into a recession. Yeah, okay, I would

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Speaker 5: like to say rantover, but we're definitely not done.

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Speaker 2: Absolutely not.

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Speaker 4: What exactly is a business cycle v because that's closely

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Speaker 4: tied to recessions, if I'm not mistaken.

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Speaker 5: Yeah, so we spoke about business cycles a little bit earlier.

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Speaker 5: But a business cycle has technically four main stages, and

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Speaker 5: they can vary in length and time and what each means.

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Speaker 5: But on a technicality, these four stages are expansion, peak, contraction,

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Speaker 5: and the truugh. So In expansion, which is the first one,

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Speaker 5: households demand more goods and services, businesses, home, or workers.

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Speaker 5: The economy is doing great, wages and prices are typically increasing,

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Speaker 5: and you're like all is good and fair in the

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Speaker 5: world of love and war. This phase ends with a

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Speaker 5: peak in economic activity. So we got to this just

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Speaker 5: before COVID, right, like everything increasing in price. Anyway, we've

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Speaker 5: just gone through this again where obviously there's been a

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Speaker 5: fair bit going on in the world. Russia invaded Ukraine,

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Speaker 5: which meant things traveling around the world and goods and

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Speaker 5: services weren't as easy to get hold of. Oil has

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Speaker 5: gone through the roof in terms of pricing and is

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Speaker 5: obviously increasing how much it's going to cost us to

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Speaker 5: put fuel in our cars. So that was kind of

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Speaker 5: the peak.

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Speaker 2: Where everything was at its most expensive. In contraction.

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Speaker 5: Households then start demanding fewer goods and services, businesses start

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Speaker 5: reducing the number of workers that they employ, and growth

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Speaker 5: in wages and prices starts to slow. So this is

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Speaker 5: what we're seeing at the moment right in our community.

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Speaker 5: We're talking to people who are like, I asked for

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Speaker 5: a pay rise, my business said they couldn't afford it,

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Speaker 5: and like that's a legitimate reason. It's not oh, you

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Speaker 5: don't deserve it. It's oh, actually things have started to stagnate.

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Speaker 5: Maybe they're not making as many sales as they used to,

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Speaker 5: or they're not going through in a period of economic growth.

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Speaker 5: And then this phase ends with what's called a truff

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Speaker 5: in economic activity. And this is kind of like that

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Speaker 5: truck fleck. It's like a bucket. It goes down, but

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Speaker 5: it always has a side to come back up, which

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Speaker 5: I think is really important. We're not absolutely in the bin, George,

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Speaker 5: but it's a period that we go through. It's kind

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Speaker 5: of like a cycle, and once we get back to

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Speaker 5: the start, we have to go round the wheel again.

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Speaker 5: It happens, and the economy resets itself. And I think

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Speaker 5: that once we feel a little bit more comfortable with that,

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Speaker 5: we're not so what would you say, doom and gloom. We're

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Speaker 5: not say, oh my gosh, this is the end of

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Speaker 5: the end.

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Speaker 2: This is the.

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Speaker 5: Worst thing ever it is, but everything will ultimately be okay.

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Speaker 4: All right, that's wholesome advice. Phoebe looked at bear markets

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Speaker 4: on the show last month. Great episode, ladies, if you

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Speaker 4: haven't listened, please go back and do so.

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Speaker 2: How do they play into a recession?

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Speaker 5: So, as we know, a bit of a rule of

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Speaker 5: a so called bear market is when there's been a

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Speaker 5: twenty percent or more continuous fall in the share market

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Speaker 5: from the peak levels over the last twelve months. Right,

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Speaker 5: So knowing that a recession, George basically means that yes,

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Speaker 5: there will be a bear market, But a bear market

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Speaker 5: doesn't mean that they will always be a recession. Does

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Speaker 5: that make sense? So like, we can experience a bear

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Speaker 5: market and not have a recession. But I don't think

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Speaker 5: there has been in the history of ever a recession

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Speaker 5: without having a bear market. So like it goes one

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Speaker 5: way and not the other way. But Essentially, what that

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Speaker 5: means is, you know, over time, if you're an individual consumer, George,

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Speaker 5: you're going to pull back on spending. You're going to

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Speaker 5: pull back on things, which ultimately impacts small businesses. People

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Speaker 5: also become a lot more conservative during this period of time,

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Speaker 5: especially banks, which then puts a lot more pressure on

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Speaker 5: small business because banks are far less likely to lend

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Speaker 5: to a small business because they're like, oh, we're going

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Speaker 5: through a recession, Georgia, do you really want you know,

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Speaker 5: a fifty thousand dollars business loan to start a candle business?

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Speaker 1: Like?

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Speaker 2: Is that the best time to do that?

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Speaker 5: So it ends up impacting a lot of people, not

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Speaker 5: necessarily just you know, consumers. It impacts small business, it

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Speaker 5: impacts big business, It impacts business growth in general. But

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Speaker 5: from my perspective, yeah, bear markets do a company recessions.

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Speaker 5: But I think it's important to know that one is

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Speaker 5: not effectively a predictor for the other, but more, you know,

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Speaker 5: an interesting I won't say coincidence, because they exist, but

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Speaker 5: it's interesting to see the relationship between the two. At

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Speaker 5: the end of the day, when we look at a

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Speaker 5: bear market and stock prices are falling, it means bad

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Speaker 5: things for businesses and people who are on the share market,

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Speaker 5: but from my perspective, even worse things for small businesses

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Speaker 5: who aren't on the share market, because they're usually the

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Speaker 5: ones that are more seriously hit. Because most small businesses

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Speaker 5: usually have some level of luxury afforded to them. So

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Speaker 5: it's not that they are a luxury business. It's that George,

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Speaker 5: if you're buying off a small business, it's very likely

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Speaker 5: it's not your fuel and it's not the food that

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Speaker 5: you put on the table. It's very likely a luxury

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Speaker 5: that you can go all right, it's not in the

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Speaker 5: budget for me this month, I can cut it out.

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Speaker 5: And so we're usually putting a lot more stress on

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Speaker 5: small businesses rather than you know, the big dogs in

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Speaker 5: the market, because you still need to put food on

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Speaker 5: the table, It still need to get to work.

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Speaker 2: G Yes, yes, v.

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Speaker 4: What is Australia's history of recessions? How many of these

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Speaker 4: things we had in the last couple hundred many many

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Speaker 4: manys okuess.

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Speaker 5: So our first one, our first recorded recession or the

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Speaker 5: biggest recession in Australia's history. It peaked in nineteen thirty

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Speaker 5: one to nineteen thirty two. This was because of the

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Speaker 5: worldwide depression, which we touched on before, and you said, oh,

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Speaker 5: that's such a negative term. In Australia, thankfully it wasn't

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Speaker 5: felt as badly. We had increases in productivity from the

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Speaker 5: manufacturing sector and Australia moved from the old model to

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Speaker 5: the new model of production, so we had trade protection,

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Speaker 5: particularly from tariffs that were implemented by the government at

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Speaker 5: that time, and they were instrumental in the wealth of

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Speaker 5: the manufacturing sector. So we were not as hardly hit. Yes,

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Speaker 5: technically we were in a recession, but we were not

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Speaker 5: hit nearly as hard as you know the US was,

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Speaker 5: where it was very dire. So next recession, Georgia king

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Speaker 5: was in nineteen seven three to nineteen seventy five, and

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Speaker 5: there's a few factors here, but essentially the nineteen seventy

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Speaker 5: three oil crisis sparked it and it caused prices to spark,

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Speaker 5: which we are outraged about at the moment because obviously

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Speaker 5: putting fueling cars is very expensive. Thankfully, we live in

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Speaker 5: a world where there's lots of alternative sources now. Historically

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Speaker 5: there were not, and according to government figures, inflation topped

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Speaker 5: thirteen percent for the year of nineteen seventy three to

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Speaker 5: nineteen seventy four, and by nineteen seventy four Australia was

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Speaker 5: technically in an economic recession that was probably perpetuated by

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Speaker 5: the failure of the Whitlam government to effectively manage the

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Speaker 5: Australian economy. And you know, obviously that was another factor

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Speaker 5: in the crisis that ended the government's term in office

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Speaker 5: at the end of nineteen seventy five, where we got

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Speaker 5: a new government and you know, things started to bounce back.

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Speaker 5: Then Georgia, we have another recession that occurred in nineteen

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Speaker 5: eighty two to nineteen eighty three, and this was experienced

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Speaker 5: by lots of different economies, particularly in the US. In Australia,

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Speaker 5: the effects of tighter monetary policy and weak global demand

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Speaker 5: were compounded by drought. So that wasn't great and that

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Speaker 5: was referred to as the quote deepest post war recession

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Speaker 5: that Australia had felt, and again largely because it coincided

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Speaker 5: with the drought, which obviously in a very farm heavy

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Speaker 5: production country, obviously impacted us very very significantly. And then

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Speaker 5: we move on to quote keating to the recession Australia

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Speaker 5: had to have, and that was in my year of birth,

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Speaker 5: Georgia King. I remember it fondly from nineteen ninety one

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Speaker 5: to nineteen ninety two and the early nineteen nineties recession

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Speaker 5: mainly resulted from Australia's efforts to address excess domestic demand,

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Speaker 5: curb speculative behavior in commercial property markets and reduce inflation.

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Speaker 5: And as I said before, Keating said, it was the

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Speaker 5: recession that Australia had to have.

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Speaker 4: So that's better branding than the Great Pression Financial Crisis GFC.

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Speaker 5: GFC col Keating, he knows a thing or two. Obviously

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Speaker 5: there's been a far greater number of recessions worldwide, but

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Speaker 5: those are the ones that had impacted Australia because obviously

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Speaker 5: we could go into the GFC, but Australia managed to

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Speaker 5: skirt that problem. Like we're lucky little little friends.

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Speaker 2: We are good.

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Speaker 4: We are going to talk about the GFC a little

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Speaker 4: later on in the show, but let's keep this ball

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Speaker 4: a rollin. So the Treasurer Jim Charmers, in his Economic

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Speaker 4: Update to Parliament a few weeks ago, said that inflation

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Speaker 4: will peak at seven point seventy five percent towards the

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Speaker 4: end of this year, a mid falling wages and slower

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Speaker 4: economic growth that is frightening.

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Speaker 5: I probably shouldn't make that sound on the show because

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Speaker 5: if you do that to my partner, Steve, he will

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Speaker 5: literally start gagging. So like, if he's doing something and

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Speaker 5: you make a gagging sound, it's like completely involuntary, and

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Speaker 5: he'll be like stop it, and I keep doing it.

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Speaker 2: It's just really nice for me.

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Speaker 5: I'm a very supportive, very kind partner and I definitely

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Speaker 5: would never make him feel gross around me.

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Speaker 4: So apologies if anyone was offended by that little sound

436
00:20:56,040 --> 00:21:00,840
Speaker 4: for sorry. The Treasurer Jim Chalmers is saying that he

437
00:21:01,080 --> 00:21:05,120
Speaker 4: doesn't expect Australia to go into a recession, which contradicts

438
00:21:05,119 --> 00:21:07,199
Speaker 4: what we've said here on the podcast today and in

439
00:21:07,240 --> 00:21:08,600
Speaker 4: the past. What do you make of that?

440
00:21:08,680 --> 00:21:10,440
Speaker 5: I mean, if I WASO the Treasurer, I'd also say

441
00:21:10,480 --> 00:21:13,040
Speaker 5: that I don't want people to be scared about heading

442
00:21:13,080 --> 00:21:15,920
Speaker 5: towards a recession. I've got a brand to upkeep. I've

443
00:21:15,960 --> 00:21:18,600
Speaker 5: just gotten into government, haven't I. I can't have my

444
00:21:18,680 --> 00:21:22,160
Speaker 5: government go straight into a recession. That's bad branding. Georgia King,

445
00:21:22,520 --> 00:21:24,600
Speaker 5: that's terrible. We have a new prime minister.

446
00:21:24,960 --> 00:21:25,919
Speaker 2: What's that going to look like?

447
00:21:26,000 --> 00:21:29,160
Speaker 5: On him, but literally, there are a fair few different

448
00:21:29,200 --> 00:21:31,639
Speaker 5: opinions floating around, right, And as we always say, with

449
00:21:31,800 --> 00:21:33,960
Speaker 5: she's on the money, because this is coming from my

450
00:21:34,160 --> 00:21:37,359
Speaker 5: perspective as a financial advisor and watching the markets and

451
00:21:37,359 --> 00:21:39,840
Speaker 5: going okay, cool, this is where we're heading towards.

452
00:21:40,080 --> 00:21:41,040
Speaker 2: This is what I see.

453
00:21:41,119 --> 00:21:43,520
Speaker 5: We've got an episode coming up after this because we

454
00:21:43,600 --> 00:21:46,600
Speaker 5: decided to split this one into two about how to

455
00:21:46,600 --> 00:21:50,480
Speaker 5: prepare yourself and what's the worst thing that can happen Georgia.

456
00:21:50,720 --> 00:21:53,480
Speaker 5: If I prepare our community for a recession, then it

457
00:21:53,560 --> 00:21:57,879
Speaker 5: doesn't happen, then everyone's just financial physically exactly. So I

458
00:21:57,920 --> 00:22:01,200
Speaker 5: think it's better to be prepared than can letely underprepared.

459
00:22:01,480 --> 00:22:03,399
Speaker 5: And as much as you know, it's really nice that

460
00:22:03,440 --> 00:22:05,280
Speaker 5: he's saying, oh, I really don't think that we'll go

461
00:22:05,359 --> 00:22:08,840
Speaker 5: into a recession, you know, not a thing. All the

462
00:22:08,880 --> 00:22:11,920
Speaker 5: indicators are showing me that we are, and our community

463
00:22:12,040 --> 00:22:14,320
Speaker 5: is asking us a lot of questions about what does

464
00:22:14,359 --> 00:22:17,240
Speaker 5: this mean? How can I be financially secure? I'm really stressed,

465
00:22:17,240 --> 00:22:19,200
Speaker 5: like I don't want that for you guys. So let's

466
00:22:19,200 --> 00:22:21,520
Speaker 5: treat it as though we are headed towards one and

467
00:22:21,560 --> 00:22:24,200
Speaker 5: we will financially prepare ourselves to be in the best

468
00:22:24,240 --> 00:22:26,760
Speaker 5: possible position. Then if it doesn't happen.

469
00:22:26,640 --> 00:22:27,120
Speaker 2: Money win.

470
00:22:28,000 --> 00:22:31,640
Speaker 4: So on this theme, v Jim Charmers blamed the Morrison

471
00:22:31,680 --> 00:22:35,640
Speaker 4: government for leaving behind a hot, flaming mess. But how

472
00:22:35,720 --> 00:22:39,720
Speaker 4: much of this is just political mudslinging from either side?

473
00:22:39,800 --> 00:22:43,640
Speaker 4: Like can governments really stop a recession with everything that's

474
00:22:43,680 --> 00:22:45,959
Speaker 4: been at play as you mentioned before the war in Ukraine.

475
00:22:46,000 --> 00:22:48,840
Speaker 4: Obviously we continue to live through a global pandemic, the

476
00:22:48,920 --> 00:22:51,680
Speaker 4: environmental crisis. There's a lot going on and it's all

477
00:22:51,720 --> 00:22:53,520
Speaker 4: combining to create a perfect storm.

478
00:22:53,640 --> 00:22:54,479
Speaker 2: One hundred percent.

479
00:22:54,600 --> 00:22:57,360
Speaker 5: I don't think that politicians have any say over how

480
00:22:57,400 --> 00:23:00,600
Speaker 5: this falls out, right, Like we had the bush fires,

481
00:23:00,640 --> 00:23:04,320
Speaker 5: then we had COVID, then we had Russia invading Ukraine,

482
00:23:04,400 --> 00:23:06,760
Speaker 5: and there's just so much going on in the world

483
00:23:07,080 --> 00:23:09,000
Speaker 5: that it seems a bit silly to go, Oh, the

484
00:23:09,080 --> 00:23:12,800
Speaker 5: politicians could have stopped this from happening. Unfortunately that's not

485
00:23:12,880 --> 00:23:16,439
Speaker 5: the case. Recessions are cyclical, like this is how the

486
00:23:16,480 --> 00:23:19,440
Speaker 5: market works, this is how it ebbs and it flows,

487
00:23:19,480 --> 00:23:22,439
Speaker 5: and they know that, which is why Georgia, every single

488
00:23:22,480 --> 00:23:27,200
Speaker 5: parliamentarian in Australian government has a share portfolio because they

489
00:23:27,240 --> 00:23:30,440
Speaker 5: know that that happens. They know how this works. They're

490
00:23:30,480 --> 00:23:34,200
Speaker 5: all property investors, they're all share investors, they are all

491
00:23:34,200 --> 00:23:36,399
Speaker 5: in situations where they know how the market works.

492
00:23:36,440 --> 00:23:38,120
Speaker 2: But it's so much better to.

493
00:23:38,320 --> 00:23:41,679
Speaker 5: Mudsling and throw shade at the last government so that

494
00:23:41,800 --> 00:23:44,600
Speaker 5: the current government gets a whole heap of praise. Right,

495
00:23:44,960 --> 00:23:48,560
Speaker 5: So I feel like it's branding. But also since the

496
00:23:48,560 --> 00:23:52,280
Speaker 5: Great Depression, governments around the world have adopted countercyclical fiscal

497
00:23:52,320 --> 00:23:55,560
Speaker 5: and monetary policies. That's a mouse that I've written down

498
00:23:55,800 --> 00:23:58,000
Speaker 5: to ensure that the run of the meal recessions don't

499
00:23:58,000 --> 00:24:00,280
Speaker 5: turn into something much more damaging to their life long

500
00:24:00,400 --> 00:24:04,720
Speaker 5: term economic prospects. Some of these stabilizers are automatic, like

501
00:24:04,880 --> 00:24:08,400
Speaker 5: increased spending on unemployment insurance that makes up a fraction

502
00:24:08,480 --> 00:24:11,840
Speaker 5: of lost income for off laid workers. Others like what

503
00:24:11,920 --> 00:24:13,920
Speaker 5: we're talking about, a lot in cheese on the money

504
00:24:13,920 --> 00:24:16,680
Speaker 5: at the moment, like rate cuts, are designed to prop

505
00:24:16,760 --> 00:24:19,960
Speaker 5: up employment and investment and require the decision of a

506
00:24:20,000 --> 00:24:23,520
Speaker 5: central bank. So in Australia that central bank is the RBA.

507
00:24:23,720 --> 00:24:26,960
Speaker 5: We always talk about it. At the time of recording this, George,

508
00:24:27,000 --> 00:24:30,560
Speaker 5: We've just had an announcement recently. The RBA is rising

509
00:24:30,680 --> 00:24:35,480
Speaker 5: rates to one point eighty five percent, which lowest growth outlook,

510
00:24:35,640 --> 00:24:38,560
Speaker 5: but at the same time is happening to put us

511
00:24:38,600 --> 00:24:41,720
Speaker 5: in a better financial circumstance. I think a lot of

512
00:24:41,720 --> 00:24:43,359
Speaker 5: people look at this and go, I can't believe this

513
00:24:43,400 --> 00:24:44,159
Speaker 5: is happening to us.

514
00:24:44,280 --> 00:24:46,000
Speaker 2: This is awful. I'm never going to get into my

515
00:24:46,000 --> 00:24:46,520
Speaker 2: first home.

516
00:24:46,600 --> 00:24:49,480
Speaker 5: This that the other like, the reason this is happening

517
00:24:49,600 --> 00:24:53,880
Speaker 5: is far bigger than an individual getting into their first home.

518
00:24:54,160 --> 00:24:56,880
Speaker 5: It's to make sure that future individuals can get into

519
00:24:56,920 --> 00:25:00,320
Speaker 5: their first home. That property stays an asset that can

520
00:25:00,400 --> 00:25:02,720
Speaker 5: still be bought and sold, like the world would go

521
00:25:02,840 --> 00:25:06,200
Speaker 5: rife if we didn't go through this process. And essentially,

522
00:25:06,240 --> 00:25:08,040
Speaker 5: as much as it sucks and as much as it

523
00:25:08,080 --> 00:25:11,160
Speaker 5: increase our interest rates, they're doing this to put our

524
00:25:11,240 --> 00:25:13,679
Speaker 5: society in the best possible position. And I think we

525
00:25:13,760 --> 00:25:16,080
Speaker 5: need to remember that. And we need to also remember

526
00:25:16,200 --> 00:25:19,000
Speaker 5: that the politicians that govern our country are the voice

527
00:25:19,000 --> 00:25:22,240
Speaker 5: of their party. It's not just elbow going I want

528
00:25:22,280 --> 00:25:24,520
Speaker 5: to do X y ZX, so therefore we're doing it.

529
00:25:24,560 --> 00:25:27,800
Speaker 5: There's an entire party behind him making decisions. It's not

530
00:25:27,840 --> 00:25:29,720
Speaker 5: just our treasure a gym turning around and being like,

531
00:25:29,720 --> 00:25:32,960
Speaker 5: oh I don't reckon it's this. It's a plethora of

532
00:25:33,080 --> 00:25:35,560
Speaker 5: teams behind him coming up with Okay, well, this is

533
00:25:35,560 --> 00:25:37,800
Speaker 5: what that take looks like. This is our research. This

534
00:25:37,840 --> 00:25:40,080
Speaker 5: is the conclusion we've come to. So I think it's

535
00:25:40,080 --> 00:25:43,600
Speaker 5: important to differentiate a bit of mud slinging, but also

536
00:25:44,080 --> 00:25:46,400
Speaker 5: what is the best thing for our economy right now?

537
00:25:46,760 --> 00:25:50,359
Speaker 5: No politician wants to have things go downhill on their watch,

538
00:25:50,600 --> 00:25:54,040
Speaker 5: so I'm not surprised that they're showing away from embracing

539
00:25:54,119 --> 00:25:54,680
Speaker 5: the topic.

540
00:25:54,960 --> 00:25:58,119
Speaker 4: Yeah, okay, we have covered a lot in the first

541
00:25:58,240 --> 00:26:02,399
Speaker 4: half of the show. Vot's syncing in for everyone at home.

542
00:26:02,520 --> 00:26:05,000
Speaker 4: We do have a lot to cover on the other side, though,

543
00:26:05,080 --> 00:26:07,880
Speaker 4: including how we got to the recession that we are

544
00:26:08,040 --> 00:26:11,760
Speaker 4: potentially entering in and what the devil happened with the

545
00:26:11,800 --> 00:26:19,480
Speaker 4: global financial crisis. So guys, please don't go anywhere alrighty vs.

546
00:26:19,520 --> 00:26:22,359
Speaker 4: So straight back into it. We touched on the GFC before,

547
00:26:22,400 --> 00:26:24,440
Speaker 4: we're speaking about the looming recession.

548
00:26:24,800 --> 00:26:27,120
Speaker 2: Back into it with some light content.

549
00:26:27,040 --> 00:26:31,640
Speaker 4: Nicely, right, but let's cast our minds one hundred years back. Also,

550
00:26:31,960 --> 00:26:36,040
Speaker 4: Ish give nearly, I Matja, thank you so much. I

551
00:26:36,119 --> 00:26:39,000
Speaker 4: want to know more about the Great Depression. Can you

552
00:26:39,000 --> 00:26:40,920
Speaker 4: tell me what went on there, what happened?

553
00:26:41,200 --> 00:26:43,280
Speaker 5: That was a big one. Yep, that was a big one,

554
00:26:43,359 --> 00:26:47,240
Speaker 5: that was really really impactful. The Great Depression began in

555
00:26:47,359 --> 00:26:50,960
Speaker 5: nineteen twenty nine and lasted for almost four years, so

556
00:26:51,080 --> 00:26:54,639
Speaker 5: obviously much longer than our average eleven months for a recession.

557
00:26:55,200 --> 00:26:58,199
Speaker 5: As with the term recession, there's no single definition of

558
00:26:58,240 --> 00:27:01,320
Speaker 5: what a depression is. However, depression can be thought of

559
00:27:01,359 --> 00:27:04,520
Speaker 5: as a much bigger version of a recession, both in

560
00:27:04,600 --> 00:27:08,680
Speaker 5: terms of scale and duration. Four times as long, yeah, exactly.

561
00:27:08,960 --> 00:27:09,040
Speaker 1: So.

562
00:27:09,160 --> 00:27:12,280
Speaker 5: Consequently, in a depression there are periods of falling output

563
00:27:12,400 --> 00:27:15,879
Speaker 5: and high unemployment rates that persist for a number of years,

564
00:27:15,880 --> 00:27:19,520
Speaker 5: which is honestly very depressing. And the scale and duration

565
00:27:19,600 --> 00:27:22,320
Speaker 5: of a depression means that there are often negative economic

566
00:27:22,359 --> 00:27:25,479
Speaker 5: outcomes that are experienced in many countries around the world.

567
00:27:25,760 --> 00:27:26,800
Speaker 2: So the definition of.

568
00:27:26,760 --> 00:27:30,760
Speaker 5: Depression says that there is a severe recession that occurs

569
00:27:30,800 --> 00:27:34,280
Speaker 5: in one or more economies. So sometimes, gee, when a

570
00:27:34,359 --> 00:27:37,800
Speaker 5: recession is announced or you know we're officially in one,

571
00:27:38,160 --> 00:27:41,720
Speaker 5: it might only be one country or another. So earlier

572
00:27:41,760 --> 00:27:44,080
Speaker 5: we were talking about how we were officially in a

573
00:27:44,119 --> 00:27:46,760
Speaker 5: recession in Australia in the middle of twenty twenty. Right,

574
00:27:46,760 --> 00:27:49,080
Speaker 5: you said, I remember that, But what you might not

575
00:27:49,200 --> 00:27:52,600
Speaker 5: remember is it was announced in other countries three four

576
00:27:52,840 --> 00:27:55,719
Speaker 5: five months earlier than that, and the US were in

577
00:27:55,760 --> 00:27:58,520
Speaker 5: that far before us, and we weren't even sure if

578
00:27:58,560 --> 00:28:01,880
Speaker 5: Australia would be in a and then we obviously made

579
00:28:01,880 --> 00:28:04,399
Speaker 5: it there and we came out relatively quickly. So it

580
00:28:04,440 --> 00:28:07,879
Speaker 5: really depends on where you are as to how significant

581
00:28:07,920 --> 00:28:10,600
Speaker 5: a recession is or you know, how impactful it is.

582
00:28:10,840 --> 00:28:13,600
Speaker 5: But a depression is kind of like the way worse

583
00:28:13,760 --> 00:28:17,879
Speaker 5: version of a recession, where things are pretty dire for

584
00:28:18,000 --> 00:28:18,840
Speaker 5: a lot of people.

585
00:28:19,520 --> 00:28:23,400
Speaker 4: Okay, well said that makes sense. So V we are

586
00:28:23,480 --> 00:28:27,439
Speaker 4: understanding why we are in this position. How does a

587
00:28:27,480 --> 00:28:29,880
Speaker 4: recession play out in daily life? How is this going

588
00:28:29,920 --> 00:28:31,400
Speaker 4: to impact shees on the money listeners?

589
00:28:31,640 --> 00:28:33,359
Speaker 5: So there are a lot of different ways that a

590
00:28:33,440 --> 00:28:35,879
Speaker 5: recession is going to impact She's on the money listeners

591
00:28:35,920 --> 00:28:38,720
Speaker 5: unfortunately have our whole list of them that are not

592
00:28:39,080 --> 00:28:42,200
Speaker 5: very exciting, but it's nice to be prepared for them,

593
00:28:42,560 --> 00:28:44,720
Speaker 5: so to list them off. Job loss is a lack

594
00:28:44,720 --> 00:28:47,360
Speaker 5: of opportunity. You might not get a pay rise during

595
00:28:47,360 --> 00:28:49,600
Speaker 5: that period of time. Property is going to be either

596
00:28:49,640 --> 00:28:53,000
Speaker 5: hard to get into or really hard to sell. Interest

597
00:28:53,040 --> 00:28:55,800
Speaker 5: rates are going to increase, investments are going to decrease,

598
00:28:55,920 --> 00:28:58,640
Speaker 5: student loans are going to feel like they have a

599
00:28:58,720 --> 00:29:01,440
Speaker 5: choke hold on us because you know, we look at

600
00:29:01,440 --> 00:29:04,160
Speaker 5: our help or hex debt and you go, oh, like,

601
00:29:04,360 --> 00:29:07,720
Speaker 5: the cash rate has increased, therefore inflation has increased, Therefore

602
00:29:07,760 --> 00:29:09,880
Speaker 5: the amount of money that my debt has increased by

603
00:29:09,960 --> 00:29:13,880
Speaker 5: each year. Even though there's no technical interest rate on

604
00:29:14,040 --> 00:29:17,640
Speaker 5: our hex debt, there's just a rise in CPI still

605
00:29:17,640 --> 00:29:20,640
Speaker 5: impacts us, right, like we're talking about it in our community.

606
00:29:20,680 --> 00:29:24,240
Speaker 5: It's not exciting at the end of the day. Unfortunately,

607
00:29:24,280 --> 00:29:27,520
Speaker 5: you might lose your job during a recession, which makes

608
00:29:27,560 --> 00:29:31,280
Speaker 5: sense because unemployment levels are on the rise, So not

609
00:29:31,320 --> 00:29:33,720
Speaker 5: only are you more likely to lose your current job

610
00:29:33,760 --> 00:29:37,000
Speaker 5: g it then becomes much harder to find a job replacement.

611
00:29:37,360 --> 00:29:39,600
Speaker 5: So you don't see a lot of people during a

612
00:29:39,640 --> 00:29:43,400
Speaker 5: recession moving roles. People usually just wait at our staple. Yeah,

613
00:29:43,440 --> 00:29:45,680
Speaker 5: and I think it's solid advice to go, well, what

614
00:29:45,760 --> 00:29:48,840
Speaker 5: should I be doing? I would be thinking about what

615
00:29:48,880 --> 00:29:50,920
Speaker 5: type of industry I'm in. There are going to be

616
00:29:50,960 --> 00:29:53,840
Speaker 5: industries that aren't nearly as hard done by. Let's say

617
00:29:53,880 --> 00:29:56,960
Speaker 5: you've got a job at Woolly's very unlikely that that

618
00:29:57,120 --> 00:29:59,400
Speaker 5: is going to be impacted because at the end of

619
00:29:59,400 --> 00:30:03,360
Speaker 5: the day, what is willis it is a supermarket. People

620
00:30:03,480 --> 00:30:06,240
Speaker 5: need to put food on their tables. These commodities aren't

621
00:30:06,280 --> 00:30:09,320
Speaker 5: really going to go anywhere if you are you know,

622
00:30:09,480 --> 00:30:12,280
Speaker 5: I don't want to dramatize and give terrible examples, but

623
00:30:12,360 --> 00:30:14,800
Speaker 5: Jess has talked about it on the show before. Jess

624
00:30:14,880 --> 00:30:17,680
Speaker 5: was made redundant from her real estate job when the

625
00:30:17,840 --> 00:30:21,440
Speaker 5: pandemic hit, Like remember her talking about that. That made

626
00:30:21,480 --> 00:30:26,040
Speaker 5: sense because as the pandemic hit, there's less necessity for people,

627
00:30:26,400 --> 00:30:28,840
Speaker 5: you know, with their hands on the ground in property

628
00:30:29,160 --> 00:30:32,960
Speaker 5: because property isn't moving as quickly as it was before.

629
00:30:33,360 --> 00:30:35,960
Speaker 5: So they're trying to lower their cost because there's less

630
00:30:35,960 --> 00:30:38,440
Speaker 5: properties being sold, which means there's less commission going around

631
00:30:38,440 --> 00:30:40,480
Speaker 5: the real estate industry, which means there's less money to

632
00:30:40,480 --> 00:30:43,080
Speaker 5: pay people. So they're making decisions that are actually in

633
00:30:43,120 --> 00:30:45,760
Speaker 5: line with their business. And from a bird's eye perspective,

634
00:30:45,800 --> 00:30:48,160
Speaker 5: you go, that makes sense to strip out costs, But

635
00:30:48,280 --> 00:30:53,520
Speaker 5: unfortunately that does mean that our community could be impacted. Interestingly,

636
00:30:53,840 --> 00:30:56,760
Speaker 5: in a lot of the articles that I read in

637
00:30:56,800 --> 00:30:58,880
Speaker 5: the research I was doing, for this episode to put

638
00:30:58,920 --> 00:31:01,760
Speaker 5: lots on the table. Retail and beauty was put on

639
00:31:01,800 --> 00:31:03,920
Speaker 5: the table as you know, an area that you know

640
00:31:04,240 --> 00:31:08,000
Speaker 5: could be seriously affected. I think I've mentioned it to

641
00:31:08,040 --> 00:31:12,800
Speaker 5: you on the podcast before recession, So I find that's

642
00:31:12,920 --> 00:31:16,080
Speaker 5: so interesting to bring up now because one, it makes

643
00:31:16,080 --> 00:31:18,320
Speaker 5: me feel more educated too. You guys will find it

644
00:31:18,360 --> 00:31:22,480
Speaker 5: relatively interesting. But if you missed it, with the recession threatening,

645
00:31:22,640 --> 00:31:25,720
Speaker 5: the lipstick effect is going to start kicking in. And

646
00:31:25,760 --> 00:31:28,280
Speaker 5: although it comes in a few different forms, it's actually

647
00:31:28,320 --> 00:31:32,200
Speaker 5: when during an economic downturn, although spending in the economy

648
00:31:32,320 --> 00:31:35,120
Speaker 5: tends to decrease or not grow as much as usual,

649
00:31:35,320 --> 00:31:39,440
Speaker 5: there's an uplift inserting categories of small luxuries because you

650
00:31:39,520 --> 00:31:41,040
Speaker 5: go from being like, oh my gosh, you'll get a

651
00:31:41,080 --> 00:31:43,160
Speaker 5: facial you're going to pull that in, but you might

652
00:31:43,200 --> 00:31:45,520
Speaker 5: go and buy a lipstick to still treat yourself.

653
00:31:45,600 --> 00:31:45,760
Speaker 1: Right.

654
00:31:45,920 --> 00:31:49,560
Speaker 5: So it's a very very interesting phenomenon where there's actually

655
00:31:49,560 --> 00:31:52,920
Speaker 5: a report by the NPD Group that says the sales

656
00:31:52,920 --> 00:31:55,520
Speaker 5: of lipstick are rising more than twice as fast as

657
00:31:55,560 --> 00:31:57,600
Speaker 5: any other product during a recession.

658
00:31:57,960 --> 00:32:01,920
Speaker 4: Well gotta look cute, You gotta look cute, look cute

659
00:32:02,040 --> 00:32:03,040
Speaker 4: doing it tough.

660
00:32:02,880 --> 00:32:06,440
Speaker 5: But I think it's so interesting to think that our

661
00:32:06,480 --> 00:32:09,960
Speaker 5: consumers are still spending money on small indulgences during a

662
00:32:10,000 --> 00:32:13,040
Speaker 5: recession when they personally have little cash. I think it's

663
00:32:13,080 --> 00:32:15,360
Speaker 5: so interesting and I want to talk about it because

664
00:32:15,440 --> 00:32:17,600
Speaker 5: I think it's something that she's on the money. You'll

665
00:32:17,640 --> 00:32:20,479
Speaker 5: be like, yes, because I need to pep me up.

666
00:32:21,000 --> 00:32:21,880
Speaker 5: And that makes sense.

667
00:32:22,520 --> 00:32:27,400
Speaker 4: Definitely feedback to the industries that are affected, and I

668
00:32:27,480 --> 00:32:30,960
Speaker 4: want to know which ones thrive as well, which industries

669
00:32:31,000 --> 00:32:31,680
Speaker 4: are the hardest hit.

670
00:32:31,680 --> 00:32:33,240
Speaker 2: I'm assuming it's the non essentials.

671
00:32:33,320 --> 00:32:38,120
Speaker 5: Yeah, so non essentials, so restaurants, bars, leisure, automotives, so

672
00:32:38,160 --> 00:32:40,600
Speaker 5: people are less likely to want to buy brand new cars.

673
00:32:40,640 --> 00:32:41,400
Speaker 2: They'll put it off.

674
00:32:41,520 --> 00:32:44,760
Speaker 5: Obviously oil and gas, which is sucky because we all

675
00:32:44,800 --> 00:32:46,600
Speaker 5: need to put petrol in our cars. And if you're

676
00:32:46,600 --> 00:32:49,160
Speaker 5: anything like me, you've been hitting your house with gas

677
00:32:49,160 --> 00:32:53,080
Speaker 5: over the winter. Sports go down because they are seen

678
00:32:53,160 --> 00:32:56,400
Speaker 5: as a luxury. And I said before real estate that

679
00:32:56,480 --> 00:32:58,960
Speaker 5: seems to be pretty hard hit each and every single

680
00:32:58,960 --> 00:33:00,000
Speaker 5: time we have a recession.

681
00:33:00,320 --> 00:33:01,120
Speaker 4: And who's killing it?

682
00:33:01,200 --> 00:33:02,000
Speaker 2: Who's killing it?

683
00:33:02,160 --> 00:33:02,479
Speaker 1: All? Right?

684
00:33:02,560 --> 00:33:05,240
Speaker 5: According to the share market, prices that fared best over

685
00:33:05,280 --> 00:33:07,920
Speaker 5: the GFC discount stores.

686
00:33:07,520 --> 00:33:11,160
Speaker 4: AH the rejects shop. Yeah, the reject shining, say, yeah,

687
00:33:11,160 --> 00:33:11,760
Speaker 4: the reject shop.

688
00:33:13,160 --> 00:33:18,080
Speaker 5: Rich tech technology? That makes sense? Bi tech, why yeah,

689
00:33:18,120 --> 00:33:21,960
Speaker 5: because they're usually pretty resourceful. So tech is all about

690
00:33:21,960 --> 00:33:26,120
Speaker 5: increasing efficiency. And usually when you go through a recession,

691
00:33:26,360 --> 00:33:28,000
Speaker 5: let's look at me as a business owner, if I

692
00:33:28,040 --> 00:33:29,920
Speaker 5: can't afford a new staff member, what am I going

693
00:33:29,960 --> 00:33:32,080
Speaker 5: to do? Try and find a software that might do

694
00:33:32,200 --> 00:33:36,160
Speaker 5: that same capability for me. So tech usually seems to thrive.

695
00:33:36,560 --> 00:33:41,480
Speaker 5: Biotech seems to thrive, drug manufacturing sure seems to thrive.

696
00:33:41,960 --> 00:33:44,440
Speaker 5: I would argue that that makes a lot of sense

697
00:33:44,480 --> 00:33:47,840
Speaker 5: to me because a very common theme that I found

698
00:33:47,880 --> 00:33:52,120
Speaker 5: throughout COVID was a lot of my friends, including me Georgia,

699
00:33:52,440 --> 00:33:55,800
Speaker 5: went back on antidepressants because we're just going through a

700
00:33:55,800 --> 00:33:57,440
Speaker 5: bit of a tough time. And it makes a lot

701
00:33:57,520 --> 00:34:01,960
Speaker 5: of sense trucking and logistics thrive, and then personal services

702
00:34:02,040 --> 00:34:06,120
Speaker 5: so things like tax returns are up. So y'all are

703
00:34:06,160 --> 00:34:08,719
Speaker 5: trying to do the right thing for yourselves. But unfortunately,

704
00:34:08,920 --> 00:34:12,280
Speaker 5: I think it's you know, not without other people suffering.

705
00:34:12,440 --> 00:34:15,359
Speaker 4: Yeah, okay, well, I mean I'm happy for the reject shop.

706
00:34:15,680 --> 00:34:18,319
Speaker 2: That's o the reject shop. Happy for that. I'm a

707
00:34:18,360 --> 00:34:19,439
Speaker 2: fan of the reject Shop.

708
00:34:19,560 --> 00:34:21,319
Speaker 4: Plenty of bargains you'll find there.

709
00:34:21,719 --> 00:34:24,160
Speaker 2: Why'd I say that backwards? Not sponsored? George and I

710
00:34:24,320 --> 00:34:24,920
Speaker 2: just obsesssed.

711
00:34:25,160 --> 00:34:27,239
Speaker 5: In fact, we've never even spoken to anyone from the

712
00:34:27,280 --> 00:34:30,279
Speaker 5: reject sl Moving on, what would you like to.

713
00:34:30,239 --> 00:34:31,239
Speaker 2: Know next, Georgia King?

714
00:34:31,320 --> 00:34:34,400
Speaker 4: So we spoke about the Great Depression, tell me briefly

715
00:34:34,600 --> 00:34:37,319
Speaker 4: about the GFC in twenty words or less. Explained to

716
00:34:37,320 --> 00:34:41,000
Speaker 4: me that horrible event in twenty words all less?

717
00:34:41,000 --> 00:34:42,440
Speaker 2: Starting to really constrain me.

718
00:34:42,719 --> 00:34:44,920
Speaker 5: I'm going to take as many words as I like,

719
00:34:45,000 --> 00:34:47,640
Speaker 5: Georgia King. But there have obviously been a number of

720
00:34:47,680 --> 00:34:51,000
Speaker 5: brief slowdowns in economic activity over the decades, and most

721
00:34:51,080 --> 00:34:54,920
Speaker 5: recently during the Global Financial Crisis or the GFC. It

722
00:34:55,040 --> 00:34:59,800
Speaker 5: resulted in significant negative shocks to the Australian economy, definitely

723
00:34:59,880 --> 00:35:03,320
Speaker 5: not not nearly as dramatic as what happened in the US.

724
00:35:03,760 --> 00:35:06,600
Speaker 5: So the Global Financial Crisis from two thousand and eight

725
00:35:06,640 --> 00:35:09,840
Speaker 5: to two thousand and nine was when international finance markets

726
00:35:09,840 --> 00:35:14,480
Speaker 5: and banking systems experienced a period of extreme stress and volatility.

727
00:35:14,680 --> 00:35:16,920
Speaker 5: At I believe it was the start of two thousand

728
00:35:16,920 --> 00:35:19,600
Speaker 5: and eight. The damage done to the financial markets and

729
00:35:19,640 --> 00:35:22,960
Speaker 5: the banking systems for many other countries, then triggered large

730
00:35:22,960 --> 00:35:27,319
Speaker 5: scale losses of economic activity and large increases of unemployment,

731
00:35:27,360 --> 00:35:30,040
Speaker 5: and for many countries it was actually the most severe

732
00:35:30,120 --> 00:35:34,840
Speaker 5: recession since the Great Depression. However, the Australian economy actually

733
00:35:34,880 --> 00:35:37,680
Speaker 5: fared much better than most because it had a really

734
00:35:37,800 --> 00:35:41,680
Speaker 5: sound financial system and a relatively large exposure to the

735
00:35:41,680 --> 00:35:45,759
Speaker 5: buoyant Chinese economy and strong stimulus for small business to

736
00:35:45,760 --> 00:35:48,759
Speaker 5: cushion it from the global downturn. So that was from

737
00:35:48,760 --> 00:35:52,200
Speaker 5: my perspective obviously benefit of being here in Australia, and

738
00:35:52,320 --> 00:35:57,279
Speaker 5: Australian GDP only declined in one quarter, although the unemployment

739
00:35:57,360 --> 00:36:00,720
Speaker 5: rate increased to close to six percent and the underemployment

740
00:36:00,800 --> 00:36:04,879
Speaker 5: rate rose sharply. So that said, gee, it actually can

741
00:36:04,920 --> 00:36:09,919
Speaker 5: be traced back to one particular financial stress in the US.

742
00:36:10,080 --> 00:36:12,480
Speaker 5: And I won't go into this too much because I

743
00:36:12,520 --> 00:36:14,600
Speaker 5: think it one I think is really interesting and I

744
00:36:14,640 --> 00:36:16,759
Speaker 5: definitely want to go into this, but you guys might

745
00:36:16,800 --> 00:36:20,280
Speaker 5: find it really boring. But financial stress is actually peaked

746
00:36:20,320 --> 00:36:23,600
Speaker 5: following the failure of the US financial firm called the

747
00:36:23,680 --> 00:36:27,359
Speaker 5: Lehman Brothers in September two thousand and eight. Together with

748
00:36:27,440 --> 00:36:29,759
Speaker 5: that failure or the near failure of a range of

749
00:36:29,800 --> 00:36:33,000
Speaker 5: other financial firms around that time. It triggered what we

750
00:36:33,040 --> 00:36:36,240
Speaker 5: would call an absolute panic in the financial markets globally

751
00:36:36,440 --> 00:36:39,160
Speaker 5: because people started to go, well, if Lehman Brothers, who

752
00:36:39,239 --> 00:36:42,440
Speaker 5: were one of the biggest financial institutions in the US,

753
00:36:42,560 --> 00:36:42,759
Speaker 5: can be.

754
00:36:42,760 --> 00:36:44,759
Speaker 2: Really untrusted, what is going on?

755
00:36:45,239 --> 00:36:47,960
Speaker 5: Like, that's really stressful. That's like me turning around to you,

756
00:36:48,040 --> 00:36:51,400
Speaker 5: George and being like, comebank, yeah gone. You'd be like

757
00:36:51,640 --> 00:36:54,960
Speaker 5: what And thankfully we live in a country where a

758
00:36:55,000 --> 00:36:56,880
Speaker 5: lot of our banks are underwritten, Like there has to

759
00:36:56,880 --> 00:37:01,040
Speaker 5: be something very very dramatic to happen for our banks

760
00:37:01,360 --> 00:37:04,799
Speaker 5: to go to absolute junk. And the reason for that

761
00:37:04,880 --> 00:37:07,120
Speaker 5: is they are underwritten by the government. And I promise

762
00:37:07,200 --> 00:37:10,360
Speaker 5: you if anything happened to any of those banks, because

763
00:37:10,400 --> 00:37:12,680
Speaker 5: of how much Australia relies on them. I mean, we

764
00:37:12,760 --> 00:37:15,080
Speaker 5: have the big four banks. If you're not with Combank,

765
00:37:15,080 --> 00:37:17,040
Speaker 5: you're with NAP. If you're not with NAB, you with Westpac.

766
00:37:17,040 --> 00:37:18,319
Speaker 5: If you're not with west Pac, you're with.

767
00:37:19,400 --> 00:37:20,319
Speaker 2: What's the fourth one?

768
00:37:20,600 --> 00:37:24,359
Speaker 4: Bendigo, No, hang on, I'm gonna get this.

769
00:37:24,400 --> 00:37:25,120
Speaker 2: You're gonna get this.

770
00:37:25,239 --> 00:37:31,120
Speaker 4: NAB, Combank, west Pack give me the first letter. Are

771
00:37:31,160 --> 00:37:37,000
Speaker 4: you serious, A and z yeay, just on the money,

772
00:37:37,000 --> 00:37:37,839
Speaker 4: ey I.

773
00:37:37,840 --> 00:37:40,200
Speaker 2: Get it, you get it, you get it, you got it.

774
00:37:40,239 --> 00:37:42,680
Speaker 2: Bend to Go Bank, Bend you Go Bank. Do you

775
00:37:42,760 --> 00:37:43,040
Speaker 2: know what?

776
00:37:43,080 --> 00:37:45,560
Speaker 5: They'd be stoked that you put them in that, And

777
00:37:45,600 --> 00:37:47,520
Speaker 5: we're going to leave that part of the podcast in

778
00:37:47,680 --> 00:37:50,160
Speaker 5: because they think it's just really wholesome. But at the

779
00:37:50,280 --> 00:37:52,600
Speaker 5: end of the day, if one of those guys went under,

780
00:37:52,760 --> 00:37:55,759
Speaker 5: including Bendigo Bank, the government would definitely come in to

781
00:37:55,880 --> 00:37:57,680
Speaker 5: find a way to make sure that all of its

782
00:37:57,760 --> 00:38:01,000
Speaker 5: consumers were okay in a way like it's not just

783
00:38:01,000 --> 00:38:02,880
Speaker 5: going to be ripped out from under us like it

784
00:38:03,040 --> 00:38:05,160
Speaker 5: was in the US. So in the US it was

785
00:38:05,239 --> 00:38:10,040
Speaker 5: far more dramatic, and obviously Liman Brothers failing was really scary,

786
00:38:10,440 --> 00:38:13,480
Speaker 5: but the actual catalyst for the GFC was falling US

787
00:38:13,520 --> 00:38:16,520
Speaker 5: house prices and a rising number of borrowers who were

788
00:38:16,600 --> 00:38:19,760
Speaker 5: unable to pay their loans. So Lehman Brothers obviously played

789
00:38:19,760 --> 00:38:24,440
Speaker 5: pretty significantly into that space. But essentially TLDR lots of

790
00:38:24,520 --> 00:38:27,839
Speaker 5: banks gave lots of people mortgages that shouldn't have had them,

791
00:38:28,080 --> 00:38:30,640
Speaker 5: and what happened there is lots of people couldn't pay

792
00:38:30,640 --> 00:38:32,359
Speaker 5: it back and if you can't pay back your loan

793
00:38:32,440 --> 00:38:33,839
Speaker 5: on a grand scale, the.

794
00:38:33,840 --> 00:38:35,440
Speaker 2: Bank has no money.

795
00:38:35,600 --> 00:38:37,680
Speaker 5: And if a bank has no money, what kind of

796
00:38:37,760 --> 00:38:39,680
Speaker 5: situation are we in, George.

797
00:38:39,360 --> 00:38:40,080
Speaker 4: A depression?

798
00:38:40,200 --> 00:38:42,600
Speaker 2: Man not Well, wasn't a depression.

799
00:38:43,280 --> 00:38:46,160
Speaker 5: It was a global financial crisis, and I would call

800
00:38:46,200 --> 00:38:49,359
Speaker 5: that a pretty big pickle. So it's one of those

801
00:38:49,400 --> 00:38:51,520
Speaker 5: things that you know, there's obviously lots to it, and

802
00:38:51,520 --> 00:38:53,680
Speaker 5: if you guys want to go further into it, at

803
00:38:53,719 --> 00:38:55,360
Speaker 5: the end of the day, there were lots of markers

804
00:38:55,440 --> 00:38:58,120
Speaker 5: on the way, but essentially there was a pretty big

805
00:38:58,160 --> 00:39:01,200
Speaker 5: housing bubble and a lot of people that were maybe

806
00:39:01,239 --> 00:39:04,360
Speaker 5: not doing the right thing that led to that. So George,

807
00:39:04,440 --> 00:39:06,879
Speaker 5: it makes sense in that light if I say lots

808
00:39:06,920 --> 00:39:09,080
Speaker 5: of people couldn't pay back their mortgages. And then you

809
00:39:09,120 --> 00:39:12,239
Speaker 5: look at Lehman Brothers, who were an investment bank. They

810
00:39:12,320 --> 00:39:15,480
Speaker 5: had subprimed mortgaged backed securities, which means.

811
00:39:15,320 --> 00:39:17,640
Speaker 2: They basically backed a whole heap of mortgages.

812
00:39:17,200 --> 00:39:20,239
Speaker 5: That weren't being paid back in a little bit of

813
00:39:20,239 --> 00:39:23,600
Speaker 5: a pickle, and whoever it invested in them, they lost

814
00:39:23,600 --> 00:39:26,759
Speaker 5: all of their money. So that is not great. There's

815
00:39:26,800 --> 00:39:29,360
Speaker 5: a lot more to it, obviously, because then you know

816
00:39:29,360 --> 00:39:31,320
Speaker 5: it's kind of like a domino effect in the US.

817
00:39:31,400 --> 00:39:34,200
Speaker 5: But we won't go on and on. But it started

818
00:39:34,239 --> 00:39:36,520
Speaker 5: to pick back up at the end of two thousand

819
00:39:36,520 --> 00:39:39,399
Speaker 5: and eight because people started investing really heavily in things

820
00:39:39,440 --> 00:39:42,719
Speaker 5: like gold and bonds and the US dollar and European currency,

821
00:39:43,080 --> 00:39:45,640
Speaker 5: as these were seen to be much safer alternatives to

822
00:39:45,680 --> 00:39:48,560
Speaker 5: the ailing housing and share market. But that kind of

823
00:39:48,760 --> 00:39:52,200
Speaker 5: was that stagnation, right, You're taking your investment out of

824
00:39:52,239 --> 00:39:55,319
Speaker 5: the share market, which could recover. And if we look

825
00:39:55,360 --> 00:39:57,920
Speaker 5: at the share market now and we zoom out and

826
00:39:58,000 --> 00:40:00,319
Speaker 5: have a big look at what that looks like, the

827
00:40:00,400 --> 00:40:05,239
Speaker 5: share market has absolutely recovered. However, people get scared, they

828
00:40:05,280 --> 00:40:07,719
Speaker 5: transfer their wealth, and it makes sense. But what we

829
00:40:07,760 --> 00:40:09,879
Speaker 5: need is an education to put us in the best

830
00:40:09,880 --> 00:40:15,200
Speaker 5: possible position. Great today, v Lord, But was there anything

831
00:40:15,480 --> 00:40:18,920
Speaker 5: we can do outside of here to kind of increase

832
00:40:19,000 --> 00:40:21,640
Speaker 5: our education? Any hot tips you have for us to

833
00:40:21,680 --> 00:40:23,680
Speaker 5: take away today? I mean, you could head to Wikipedia

834
00:40:23,719 --> 00:40:25,239
Speaker 5: and read a whole here of stuff. You could head

835
00:40:25,280 --> 00:40:28,440
Speaker 5: to investor Pedia, you could head to the RBA website.

836
00:40:28,480 --> 00:40:30,200
Speaker 5: You can read more on the news, but no one's

837
00:40:30,200 --> 00:40:32,880
Speaker 5: going to do that. What I recommend from a personal

838
00:40:32,920 --> 00:40:36,680
Speaker 5: perspective is watching the movie, the twenty fifteen movie, George,

839
00:40:36,719 --> 00:40:37,400
Speaker 5: The Big Short.

840
00:40:37,840 --> 00:40:40,160
Speaker 2: Ah yeah, yeah, I mean Bale Yeah.

841
00:40:40,320 --> 00:40:44,719
Speaker 5: Great movie, really factually inaccurate, but essentially The Big Short

842
00:40:44,760 --> 00:40:47,239
Speaker 5: chronicles the years leading up to the two thousand and

843
00:40:47,280 --> 00:40:50,279
Speaker 5: seven slash two thousand and eight global economic crisis, and

844
00:40:50,280 --> 00:40:52,640
Speaker 5: from my perspective, I just think it's a really approachable

845
00:40:52,680 --> 00:40:55,279
Speaker 5: way to get a bit of a handle on what

846
00:40:55,320 --> 00:40:58,320
Speaker 5: that actually looked like. From you know, I don't really

847
00:40:58,440 --> 00:41:00,880
Speaker 5: like how the financial service is into three was portrayed

848
00:41:00,920 --> 00:41:03,000
Speaker 5: in that movie. But at the end of the day,

849
00:41:03,040 --> 00:41:05,000
Speaker 5: The Big Short is a pretty good movie. It really

850
00:41:05,080 --> 00:41:08,880
Speaker 5: humorously kind of outlines the complicated events that led to

851
00:41:08,960 --> 00:41:11,680
Speaker 5: the Great Recession, and you know, from my perspective, you

852
00:41:11,680 --> 00:41:13,160
Speaker 5: could learn a lot. I mean, you're not going to

853
00:41:13,160 --> 00:41:15,920
Speaker 5: become a financial advisor from it. But next week on

854
00:41:15,960 --> 00:41:17,399
Speaker 5: the pod, yep, what are we doing?

855
00:41:17,600 --> 00:41:20,960
Speaker 4: We are talking all about how to prepare yourself for

856
00:41:21,000 --> 00:41:23,160
Speaker 4: a recession, So that'll be more hands on, full of

857
00:41:23,200 --> 00:41:23,920
Speaker 4: tips and tricks.

858
00:41:23,960 --> 00:41:25,799
Speaker 2: I guess exactly. I love it really.

859
00:41:25,920 --> 00:41:28,160
Speaker 5: Yeah all right, well that is unfortunately all we have

860
00:41:28,239 --> 00:41:29,040
Speaker 5: time for today.

861
00:41:29,280 --> 00:41:32,080
Speaker 2: George King, could you wrap the boring but important stuff

862
00:41:32,120 --> 00:41:32,720
Speaker 2: pretty please?

863
00:41:32,800 --> 00:41:35,960
Speaker 4: Would be an honor and a privilege. Alrighty guys, please

864
00:41:36,280 --> 00:41:38,840
Speaker 4: stop that. The advice yet on G's on the Money

865
00:41:38,960 --> 00:41:41,560
Speaker 4: is general in nature and does not consider out your

866
00:41:41,560 --> 00:41:45,320
Speaker 4: individual circumstances. She's on the Money exists purely for educational

867
00:41:45,320 --> 00:41:47,319
Speaker 4: purposes and should not be relied upon to make an

868
00:41:47,320 --> 00:41:50,680
Speaker 4: investment or a financial decision. And we promise Victoria Devine

869
00:41:50,719 --> 00:41:53,480
Speaker 4: and She's on the Money are authorized representatives of in

870
00:41:53,600 --> 00:41:57,440
Speaker 4: Focused Securities Australia Priortarily Limited ABN four seven zero nine

871
00:41:57,480 --> 00:42:00,239
Speaker 4: seven seven nine seven zero four nine, APHA, Salt three

872
00:42:00,239 --> 00:42:01,320
Speaker 4: six on two three.

873
00:42:01,480 --> 00:42:03,040
Speaker 2: See you on Friday, guys.

874
00:42:13,920 --> 00:42:13,960
Speaker 4: M