Apparently you’re rich!

If you watch mainstream media, you may be under the impression the economy is doing incredibly well.  Australians are super prosperous, home prices have been going up, your Superannuation and stocks have been climbing for what feels like forever, and employment is up too. So according to them apparently you’re rich?

Mainstream media’s Financial delusion

The media would have you believe Australian’s finances are totally under control, and that we are having a ‘dream run’. We think otherwise.

The reality is, people are dealing with more debt today than at the height of the economic debt crisis of 2008 (The GFC).

Australias Debt Binge_Glass Wealth Planning_Financial Advice Brisbane

Australia’s Savings huge decline

Our national wage growth has been falling for 10 years, and household savings here in Australia are the lowest they have been in 9 years, dropping from the average 9.84% down to 2.10%! When you consider that healthy household savings using means a healthy economy, you have to wonder why they are so low at present.

Savings rates are the lowest in 10 years

Something else to ponder- If we do believe the mainstream rhetoric of ‘strength in the economy’, then we must then also ask ourselves, why do interest rates remain so suppressed? The Reserve Bank of Australia (RBA) rate is still at all-time lows? But shouldn’t rates rise if the economy is strong?

Australians Savings have fallen 80% in recent years_

The RBA is scared to raise interest rates

The fact is, when the RBA does raise interest rates, it’s generally done so in an effort to stem an over-heated market- one where inflation is rising too high or too fast.  This helps the RBA to keep inflation in ‘sweet spot’.

Right now, we believe if the RBA does increase interest rates, a lot of people will suffer. Why? Simply because right now a lot of Australian’s hold a lot of debt – particularly those who have borrowed deeply to get into the Sydney, Melbourne and perhaps Brisbane property markets over the last 5 years.

Even the debt levels of even small borrowers, those who are inclined to fund day to day living or lifestyle through credit cards or personal loans, will be impacted by rising rates.

Reserve Bank of Australia_Stuck in Neutral_Glass Wealth Planning_Financial Advice Brisbane

Would a rate rise or two blow up our economy?

Quite simply, any increase in rates however minor could lead to huge financial stress for Australians and in turn the wider economy. The messages ‘we are all wealthier’ and ‘all is well in the economy’ belies the actions of those at the helm and underlying data that reveals a fragile economy.

At the moment it feels the media’s unwritten rule is to sugar coat our nation’s financial reality to make it more palatable. What we critically need is a financial reality check. A realistic, and perhaps stark portrayal of our true economic position which would help us better plan and prepare for possible scenarios based on reality rather than those based on a pseudo-economy.

 

Is the stock market on drugs?