With the arrival of COVID, the International Monetary Fund has mentioned in their latest World Economic Outlook report that the global economy is likely to experience its worst recession since the Great Depression, even surpassing the global financial crisis.
While the global economy is expected to shrink by 3%, the report indicates that Australia is expected to bear the brunt of the economic effects of COVID-19 with the GDP expected to shrink by 6.7% this year – more than double the world’s average.
Treasurer Josh Frydenberg confirms Australia has entered its first recession almost after three decades of Australian prosperity. In the official report published by the Australian Bureau of Statistics, the country’s economy shrank by 0.3% in the first quarter, the second time the GDP growth dipped into the negative since the financial-led crisis of 2009.
Feeling the effects
The repercussions of this crisis will ripple through homes across the nation, and impact the basic livelihoods of many. Managing finances through such unprecedented times is imperative and remains a primary concern for most Australians.
Through the recession, Australians have to navigate through job losses, shortened working hours, and a sudden lack of jobs. To minimize the impact, there’s a need to focus on safeguarding finances however possible, as every little bit counts.
Build up a savings nest
Start by safeguarding your financial position with a savings nest that consists of at least 3 to 6 months’ worth of expenditure that can be utilized in case of any future financial hardships.
With almost a million out of jobs in Australia and an estimated 1.5 million to be out of work during the first half of this year, the Federal Government is looking to provide some normalcy to the economy through the provision of benefits. Eligible applicants can apply for JobSeeker and JobKeeper. As these benefits will not last forever, it is imperative that this amount is used sparingly and saved wherever possible.
Additionally, refinancing housing loans on lower interest rates can potentially save thousands. As banks, financial institutions, and landlords are more understanding during this difficult time, you can request for deferment of loans (housing, business, car) or a rent freeze. You can then temporarily place this money in your savings and in case of future need, at least there is a healthy sum set aside to prevent defaulting of payments. Similarly, if you were planning on undergoing home improvements or a home renovation but now don’t have the upfront cash or are being more money-conscious, the Australian government has recently released news of a tax-free HomeBuilder grant.
With the amount of money saved on refinancing, you should place it in higher interest accounts where you can net up to an additional 2.26%. Some banks that offer these interest rates include AMP and Macquarie Bank.
Diversify your income stream
In addition to saving money from available means, one should also find ways to diversify their monetary streams. With the number of jobs dwindling during these strenuous times, finding part-time jobs during this challenging period can help immensely.
- Is there something that you’re good at or passionate about? Use this opportunity to take the leap and add a side hustle. Possible side incomes with relatively low barriers of entry include:
- Driving an Uber/Lyft
- Providing food delivery services
- Renting a spare room
- Selling used items or crafts
- Selling services on online platforms
Learn to Invest
Investing can help with making additional money during this process. If you’re just getting started, an expansive library of online resources is available to point you in the right direction. For the newly initiated who would like to buy into a diverse portfolio to mitigate risks — ETFs are a popular option. LICs and LITs are other widely available stock options, so do some research to select an investment plan that is most suitable for you.
The current economic situation seems dire, however, with companies racing towards a vaccine, and countries learning how to manage the outbreak, a new normal will be carved out.
You are not alone. The impact is felt globally, and it is possible to protect your financial position during this period. Projections for 2021 remain positive as Australia’s GDP is expected to grow by 6.1%, almost back to pre-COVID levels.
A better future lies beyond the horizon, and if you have some free time on your hands, why not try to beat the crisis and explore new ways of bettering your finances during this otherwise tiresome period?