• With ongoing doomsday talk about the economy, it's hard not to have some concerns about your family's future. (Getty Images)Source: Getty Images
With so much talk of China's slowing economy, our falling dollar, and new tax reforms on the brink; it's no wonder families are worried about their financial future. But we've talked to the experts and they say with a few small changes, you'll have nothing to worry about.
By
Shami Sivasubramanian

15 Feb 2016 - 12:37 PM  UPDATED 15 Feb 2016 - 12:37 PM

The Prime Minister described it as "agile". The treasurer called it "very sound". But with ongoing doomsday rhetoric about China's contracting economy, the US interest rate at practically zero, not to mention the refugee migration crisis affecting the Eurozone's finances, it's hard not to have some concerns about your family's future.

So we spoke to Dr Colm Harmon, the head of the School of Economics at the Univerisity of Sydney and Craig James, the Chief Economist at ComSec to find out what's really going on.

1. A slowing economy is not the same as a recession.

"We’re tending to interpret slowing in the economy, changes in the economy as recession," says Dr. Harmon, who admits that amidst the swarth of negative rhetoric he firmly sits in the "glass half full camp".

With a move away from the resources boom towards a more entrepreneurial enviroment, there are bound to be short term lags, rate of growth might slow down, but we are not contracting, we're not growing less.

A recession, by definition, is when the economy actually contracts for two consecutive quarters. By "contracts" we mean the economy actually stops growing and instead shrinks. The quarterly growth rates (which shows how much the economy grows over a quarter of the year) for the last three quarter in Australia are 0.6% (for March quarter), 0.2% (for the June quarter), and 0.8% (for September quarter). Those are all positive numbers. So what is happening currently is our economy is still growing, but in June is grew at a tad slower rate. Which is perfectly natural given the changes in the source of our nation's growth.

2. Your kids might not have the same opportunities you had growing up, but they'll have different ones. 

"Kids growing up now won’t have as many opportunities in manufacturing than, say, fifteen years ago," says Dr Harmon.

China was our number one customer when it came to buying natural resources, but now they've decided to move away from a manufacturing economy to a consumer-led one, which is hurting our resource industry.

"You've got to remember," says Mr James from ComSec, "China is a developing nation. Once you become a more mature economy, you slow down a bit."

Dr Harmon adds though China is in transition, it has been for some time now. So, it won't affect Australia much with its own transition. And though jobs in the manufacturing sector will reduce inevitably, plenty of opportunities will be available in the services and exports sectors. 

"China is a big one. It has shown that manufacturing will suffer. Jobs and growth will come through services, the health sector, exports. And in planning what you kids will be doing in the next five to ten years will need to account for that," says Dr Harmon. 

3. It's actually a good sign that our dollar is down. 

It might seem counterintutive at first glance, but when our dollar is down, it's usually a sign the US is doing well. And according to Dr Harmon, when the US does well, the whole world does well. 

"The US is a bellwether for how the world is doing. Right now, the US is doing only modestly well, which means we don’t see it as a drag on Australia in terms of growth," Dr Harmon says.

Of course there are direct benefits of a cheaper currency such as an encouraged export market. And though China may been the source of our resource sector's downfall, they are they generously feed our tourism industry. 

As Mr James puts it, "When China closes a door, it opens a window." 

4. The housing market is tough to crack into, but with low interest rates, borrowing money has never been better.

This month the Reserve Bank held interest rates at a record low of 2%. While that means your return on investment mightn't be the greatest, a 2% cash rate means money is cheap to borrow.

Mr James also says the housing market is what's keeping our economy afloat.

"Here in Australia, the economy is driven by the housing sector more so than the manufacturing and mining sectors. The housing market in turn, creates demand for building materials too.  And then later down the track, for complement goods like frigdes, microwaves, etc," he says.

And now with talk of negative gearing reform, pushed by Labor's new policy proposal on the matter, buying a new home may soon become much easier.

5. The unemployment rate isn't going to change anytime soon, but that doesn't mean your job hangs in the balance.

The unemployment rate is at 5.8%, having fallen slightly since last November. And there’s little indication it’ll rise anytime soon, according to both Dr Harmon and Mr James.

"Inflation is as flat as a pancake. Unemployment is as flat as a pancake. It's going to stay this way while the sluggishness in global economy works it way out," says Dr Harmon.

But it does go back to the new service-based sectors that will see growth. They will be the future of job opportunities, he said.

6. Europe's economy has little to no affect on us.

Of course, as members of the global economy, how any other nation's finances are operating affects Australia in a general sense. According to Dr Harmon and Mr James, the Eurozone's current financial volatility has little influence on our own markets.

"Europe is a curiosity to watch, but doesn’t have much of an effect on Australia," says Dr Harmon. 

Mr James agrees, "We don't move in lockstep with the rest of the world."

7. There is positivity in the markets not fear.

After the Abbott-Hockey bottom line of austerity and sacrifice, the Turnbull-Morrison government has turned to more confidence-building rhetoric like, "there's never been a more exciting time to be an Australian".

"It's a Keynesian kind of line of thought. 'Now is not the time to lose confindence. Now is the time to focus on what to do,'" shares Dr Harmon. 

He also believes Australia is in a very unique position, a position that allows our us to debate tax reform, new initiatives, and "where we want to us ourselves as a nation in five to ten years".

"Now is the time to make those targets," Dr Harmon says.

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