Video Transcript 1
Do you know what I think is about to happen? I honestly believe Australia is on the verge of its first recession in 30 years.
Australia is facing its first recession in nearly 30 years. And we’re not just talking any old recession here. We’re talking about a complete crash in stocks. We’re talking about property. We’re talking about a time in our lives when houses are going to be worth less than the mortgages attached to them. We’re talking about a currency worth almost 20 cents less than what it’s worth now. We’re talking about less money coming into the country to fund projects, infrastructure projects. We’re not talking about any old recession here. We’re talking about a wealth-altering recession. The sort of thing that could destroy what people have taken decades to accumulate. The sort of recession that I think that we’re looking at could be a complete wealth erosion.
In Australia, we’ve got these two pillars that have essentially held up our economy for the past 20, 30 years. They are mining and property prices. So basically, we worked out how to dig up our rocks and sell them to the highest bidder, which for the last 15 years has been China. And then as China started to slow down buying our dirt, essentially, we used property to hold up the Aussie economy. And we’ve essentially turned housing into an industry in Australia.
What a lot of people don’t realise is that the construction sector in Australia employs over one million people. It works out to be roughly 11% of our total employed population, working construction. When you’ve got that many people working towards one sector of the economy, you can’t then have that crash and not have a flow-on effect to other areas of the economy. Essentially, we’ve had mining and property prop us up for a very long time. And the rug is basically gonna be taken out from under us.
Again, I think that people don’t realise this. And it’s because it’s become our new normal. The Chinese economy has actually saved the Aussie economy a couple of times in the past two decades and people don’t realise this.
First of all, I want to take you all the way back to the dotcom bust. Now, that barely touched the Aussie economy, and it’s partly because we had no real tech sector to suffer in the dotcom bust.
However, the Aussie dollar did fall significantly during that time. However, the reason why I bring up this point is because this is when the Chinese really started to buy up our resources. This was our first economic experience with a mini resource boom. That really helped Australia soar after the dotcom bust and it was why we were able to weather the storm and it didn’t hurt us too much, so our cheap Aussie dollar compounded the amount of resources that we sold to China. Then again, in 2008, not long after the stock markets crashed, China once again revved up their credit injection into the economy — so their stimulus programs — and they started buying up our resources at a rate unseen before. This propped up the Aussie economy in a way that we couldn’t possibly imagine. This is what I mean by the new normal.
For 15, 16 years now, we’ve relied on China to buy our stuff — that’s really it. And this time around, the Chinese government have spent trillions of dollars in their own economy, buying things and building things that they don’t really need, and they’re running out of the ability to keep creating money to buy stuff from us. This time around, when the market does fall down, China doesn’t have the ability to come rescue us once again.
I believe the next crisis is already happening. Crises don’t happen overnight and this is the thing. They always blindside us when they hit the news. The crisis builds for months, if not years. For example, let’s go back to the most recent crisis — the 2008 one — that was actually triggered in March of 2007; March to April 2007. It took 18 months for all the problems to gather steam before they unleashed in the full-blown financial panic that we saw in 2008.
I’m already seeing these signs unravel now. I’m seeing this crisis form. You know, we’re looking at wage growth, which is incredibly slow and it has been for years, but there’s no indication that it’s really about to pick up on an individual level because a lot of the data looks at wages collectively. Inflation is at rock bottom. We have low interest rates in Australia, and whispers going around that the RBA is going to cut them further, but inflation still isn’t picking up.
More to the point, we’ve got household debt. People owe more money than they ever have at any point. I think the last number I saw was 127% of GDP. That’s a terrifying figure. We’ve got Aussie mining exports. Again, going back to what I said previously, China’s been our biggest buyer for nearly two decades, but now they’re weaponising our only resource that we ship off to them. They’re already refusing our coal, so what’s the next thing? We’re not the only country in the world that can provide iron ore. They’re reducing the amount of products that they buy from us.
Further to the point, we’ve got property prices falling all throughout Australia and there’s a lot of experts out there saying it’s going to get worse. What we’ve got to remember, though, is that Australia is very much a two-pillar economy. We’ve got houses and holes — I think that’s the saying. We’re a mature economy as well. There’s no ability to create a brand-new sector to prop us up. These things are starting to gather steam, but there’s no white knight coming in to bail us out this time — we just don’t have it.
The signs in the Aussie economy are quite ominous right now. In tomorrow’s video, I’d actually like to show you how we got here. But also, too, in three days’ time from now, I’d actually like to share with everybody my recession survival strategy, which I’ve spent the past couple of months putting together.
My second video is coming out tomorrow. Make sure you watch it.