In the 1980s my parents were building their dream house from the footings up on a new block of land in Canberra. What they didn’t know at the time was Australia’s Federal Reserve was “waging a war against inflation”, driving interest rates up and up and up. By June 1991 the Australian economy would be in recession – defined as two consecutive quarters of negative growth.
There has been much written about those times and what the causes of the recession were: a New York Stock exchange crash in 1987, the lack of competitiveness of Australian exports on world markets; trouble in both the rural and manufacturing sectors which led to job losses and high unemployment. Federal Treasurer Paul Keating’s comment that the recession was having a necessary corrective effect on the economy – ‘This is the recession we had to have’ – was widely criticised.
"The worst financial crisis in living memory was the asset price boom of the late 1980s and its bursting in the early 1990s," former Governor of the Reserve Bank of Australia, Ian Macfarlane, told a 2008 Lowy Lecture audience.
In the end my parents’ mortgage interest rate hit 16% and it was crippling. Many of their friends were in a similar predicament and were forced to sell their houses. My parents fought hard, were frugal, and held on to our family home.
I knew cash was scarce in our house because my parents often discussed it. We also began living on meatloaf and curried sausages.
In April this year, at the height of coronavirus lockdown and as the economic downturn began to bite, Coles reduced the price of selected beef mince to “help lower the cost of the household staple at a time when many Australian families are doing it tough.”
It’s reported that Coles saw demand for meat increase with people cooking at home more often. Mince has always been a staple when you want to save money.
According to a recent Grattan Institute paper “Shutdown: estimating the COVID-19 employment shock” Australia is facing either the worst or one of the worst economic downturns in its history. And there could be a ‘second wave’ hit to the economy even after the immediate health threat eases.
“Between 14 and 26 percent of Australian workers could be out of work as a direct result of the coronavirus shutdown, and the crisis will have an enduring impact on jobs and the economy for years to come.
“More than half of all workers in the hospitality industry could lose their livelihoods, as will many workers in retail, education, and the arts.
“Lower-income workers are twice as likely to be out of work as high-income earners. Younger Australians and women are also likely to be hit harder, because they are more likely to work in occupations and industries most affected by the shutdowns and spatial distancing measures imposed to slow the spread of the virus.
History tells us that recovery from periods of high unemployment is rarely fast.”
The Grattan Institute predicts that these figures could mean the highest unemployment rate since the Great Depression in the 1930s even though Australia’s governments are spending record amounts to try and cushion Australians from the worst economic impacts of the COVID-19 crisis.
The Wall Street crash of 1929 led to a worldwide economic depression. The Australian economy at the time collapsed, and unemployment reaching a peak of 32 per cent in 1932. In the lead up to the crash the Australian economy was already in crisis from falling wheat and wool prices, and competition from other commodity-producing countries. Australia was also borrowing large sums of money, which dried up as the world economy slowed. The immediate effect of the worldwide economic depression was on individuals and families. Men, the traditional breadwinners at the time, were humiliated and powerless; children went without enough to eat; women desperately tried to hold families together.
There were 'baby bundles' handed out at Government-run baby clinics and many children lived on Arrowroot biscuits and condensed milk. Life was tough at home with domestic duties and child-rearing seen as the sole responsibility of women. There was often no electricity, no running water or money to buy new clothes or shoes. Bathing children and washing was often done in a communal outside tub and those without electricity or gas had to collect and chop wood for heating and cooking. It took Australia almost a decade to recover from the Great Depression.
The long-term impacts of COVID-19 globally are only just beginning to unfold. But, like our great-grandmothers, grandmothers and mothers’ Australian women and their families will adapt and survive and hopefully thrive. I haven’t eaten a sausage for almost 40 years but when I look back now on my childhood, I recall many fond memories. I spent a lot of time with my family, played with the kids in the neighbourhood and rarely ate takeaway meals. (Maybe a barbeque chicken and chips on a Friday night.)
Right now, I can hear my own two daughters, 11 and 14, in the kitchen eating homemade Tacos for dinner (there’s that mince, again) and chatting about their afternoon down at the park riding skateboards and scooters with old neighbourhood mates. Friends they rarely had time for in 2019. No Uber Eats, no TikTok, just old-fashion family time.
As we move from health crisis to considering recovery and the economic implications of the pandemic, there are steps we can take to control our futures and our finances. The Davidson Institute, Westpac’s Financial Education arm, has a useful cost-cutting checklist. Download it here.
Its Budget Planner tool and How to video, which you can see here, can help navigate a path, financially. If you are unemployed or on reduced income or just want to start saving for the future, knowing what you have, what you’re spending, and how you can save, are important steps in the recovery process.
The information above is general in nature. Always seek professional assistance to ensure that your decisions are appropriate to your personal circumstances and objectives.