Why does Australia feel like it's in a recession?

Have you ever looked around and thought...

"Everything just feels harder than it used to."

You're not imagining it.

Every week I try to spend time speaking with people smarter than me.

People who see things from a different perspective.

Last week we sat down with a fund manager whose team manages more than US$237 billion around the world.

We weren't talking about shares.

We weren't talking about markets.

We were talking about Australia.

And one sentence really stuck with me.

"Australia is already in a per capita recession."

I'd heard the term before.

But I realised most Australians probably haven't.

And yet...

They're living it every day.

Here's what it means.

Normally, when people hear the word recession, they think the economy is shrinking.

Technically, that means two quarters of negative economic growth.

Australia hasn't officially had one.

So why does it feel like we have?

Because there's another way to look at the numbers.

Imagine the Australian economy is one giant pizza.

Every year the pizza gets a little bigger.

Sounds great.

But what if more and more people arrive at the table?

Now everyone gets a smaller slice.

That's a per capita recession.

The economy keeps growing.

But the population grows even faster.

Which means the average Australian ends up with a smaller share.

Suddenly a lot of things make sense.

Why groceries feel more expensive.

Why households have less money left over each month.

Why savings accounts have been slowly shrinking.

Why mortgage stress has increased.

Why so many businesses say customers are spending less.

The economy may still be growing.

But many Australians don't feel like they are.

One report from the OECD even found Australians have experienced one of the sharpest declines in living standards among developed countries since the pandemic.

That's a sobering statistic.

One of my favourite quotes says:

"Statistics explain the past. Planning prepares you for the future."

That's exactly how we think about financial planning.

We can't control inflation.

We can't control interest rates.

We can't control government policy.

But we can control how prepared we are.

That's why we spend so much time helping clients build stronger foundations.

Reducing debt.

Growing investments.

Building emergency savings.

Reducing unnecessary tax.

Making work optional sooner.

Think of your finances like a boat.

You can't stop the waves.

But you can build a stronger boat.

And stronger boats handle rough seas much better.

If the last few years have felt harder than expected...

You're not alone.

Many Australians feel exactly the same.

The important thing is not waiting for the economy to improve before taking action.

The best time to strengthen your financial position is while the waves are still rolling.

Because eventually they settle.

And when they do...

The people who prepared are usually the ones ready to move forward first.

If you're wondering how your own financial plan would cope if these conditions continue for another year or two, we'd love to help.

Sometimes one conversation is all it takes to replace uncertainty with clarity.

Reading is helpful. Having a plan is better.

Book your free 30-minute Discovery Session and let’s build a strategy that fits your life.

7Wealth Pty Ltd ABN 44609210246 is a Corporate Authorised Representatives and is authorised throughCobalt AdvisersPty Ltd ABN 64 628 654 099 who is an Australian Financial Services Licensee 512550. 7Wealth Pty Ltd is a Credit Representative ofAustralian Finance GroupLtd ABN 11 066 385 822 (AFG) Australian Credit Licence 389087.
This blog contains information that is general in nature. It does not constitute financial or taxation advice. The information does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Cobalt Advisers Pty Ltd nor their directors, employees or authorised representatives, do not give any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document.