Paul Keating famously proclaimed when we hit the wall back in 1991 that it was the recession Australia had to have.
So, is coronavirus perhaps the event Australia has to have for everyone, especially younger generations, to finally get back to basics?
Despite the prosperity we have enjoyed throughout 29 years of continuous economic growth, we are seeing that an incredible disservice has been done to so many.
Human nature dictates that we want each generation to suffer less hardship than the one before.
But by achieving the standard or living we enjoy today, some valuable life lessons taught to past generations have simply disappeared. Now, with the economic shutdown, those who haven’t been taught those lessons seem to be floundering.
It is less than a month since the various lockdown measures commenced across Australia.
One hidden –- but now very real — lesson is how few Australians simply have little or no savings to fall back on beyond their regular pay cycle.
It might come as a surprise to some millennials, but past generations also had to cope with rents, mortgages, HECS debt, credit cards and personal loans.
Many Australians remember the 17.5 per cent interest rates during Keating’s recession. Today, with the cash rate at 0.25 per cent, some mortgage interest rates being offered are under three per cent.
That is why the economic impact of the pandemic needs to be a massive wake up call. It is not a criticism or a condemnation. It is a wake-up call that a change in thinking is needed when it comes to personal finances.
The old thinking of ‘saving for a rainy day’ has long gone from the psyche.
Well, that rainy day is now. Sadly, for far too many, there is no umbrella to protect them.
Recent figures show a quarter of all Australians have less than $1,000 in savings.
Clearly, being able to live through an emergency has never been properly factored in by many of those who haven’t known a recession, let alone a lockdown of this magnitude.
While Covid-19 is like nothing anyone could have ever imagined, the principle of saving some money every pay cycle should have always been there.
Increased JobSeeker payments don’t begin until April 27 and many won’t qualify for boosted welfare payments.
If there was no Covid-19, there would still be a group of people who either don’t know how to live within their means or who simply don’t want to and want to be bailed out by everyone else.
Surely everyone knows that they will get an unexpected bill at some stage in their life, even in more normal economic times.
Chances are most people will have had unexpected financial pressure – a flat tyre one day; a flat battery a few days later; maybe some unexpected dental work. Without some savings to get you through, the only other option is expensive personal credit that can set off a downward financial spiral.
The culture of the past few decades of spending absolutely everything from payday to payday is now crippling many people’s future.
Just because you earn a lot, doesn’t mean you should be living a lifestyle cushioned and reliant on credit.
Tap-and-Go and pay-later technology is great for most. But it is a trap for those who don’t have the skills or the discipline to manage credit appropriately.
Past generations saw credit cards a last resort -not as an extension of their weekly income.
None of this is rocket science. Financial commentators regularly advise packing your lunch from home, limiting your takeaway coffees each week and refilling your own water bottle or drinking from the tap. Too often they have been speaking but too few have been listening.
Even if you save just $20 a week, that’s more than $1,000 a year saved – for that rainy day.
Cut back a few expensive dinners or drinks, or simply limit the expenditure, and the piggy bank soon builds up to a substantial amount. And it can be done on any budget and any income – including by part time students.
For those doing it tough, we have seen the boost to JobSeeker and the unprecedented $130 billion JobKeeper wage subsidy package, which will assist many people. The cost of these kinds of bailouts will burden our economy for decades to come.
But the need – and absolute urgency – of these packages has exposed just how important it is to have some savings tucked away to support yourself rather than solely relying on government.
After Covid-19, hopefully that is one of the positive messages we can take from all the chaos. More measured spending will help us all better withstand the next crisis.
The best lessons Covid-19 can teach all Australians is to look at our lifestyles, make some changes for ourselves so we can be more in control in the future.
Would it be too much to ask that our school system might also help future generations by teaching them basic budgeting and savings skills? Or will they soon forget about rainy days and go back to preaching that it will never rain again?
Got something to add? Join the discussion and comment below.