There is no doubt that the Australian economy is at an interesting point. With ongoing trade wars, ever-improving technology and an ageing world population; just how will Australia navigate into the future?
Challenges facing Australia:
An ageing population
Since the Sixties, life expectancy has increased by around 30%, placing great strain on the economy having to support an older population.
We have seen the retirement age lifted, and experts expect more retirement age increases in the future; although future increases are currently on hold.
Treasurer Josh Frydenberg has spoken on the challenge Australia will face as our population ages. “Shifts in the world’s age structure will provide opportunities as the shape of the goods and services we consume change but will also give rise to challenges as workforces start to shrink in some nations.”
“Australia won’t escape unscathed, either: women and older workers are staying in the workforce for longer to make ends meet.
He went on to explain how the economy will come under greater pressure as the proportion of the working age population continues to fall and the demand this will have on health, ageing and pension systems.
With more people saving for retirement, interest rates are driven down, which influences the amount of investment in the economy.
The number of people living in bigger cities
Over half the world’s people now live in urban areas, a number set to rise to more than 65% by the middle of the century.
In Australia, we have been able to use this to our advantage with our riches in resources helping drive this urbanisation.
However, the carbon footprint of growing urbanisation is growing. Frydenberg laments the contribution “to the impact of human-induced climate change.”
“The challenge for the future will therefore be to use technology and policy settings to ensure that continued urbanisation is sustainable.
Household debt has risen dramatically
Australia has a rising level of household debt to income; currently 200%.
Driven by housing boom after housing boom, we have pushed property prices and this has led to the rise in household debt.
The concern is that if a recession occurs or housing prices decline, then this debt could come crashing down.
But Australian is not alone, globally debt levels are at AU$274.85 Trillion.
Frydenberg explains that “at these levels, the ability to respond to future shocks is more constrained, the impact of any future shock is more amplified and future generations will be left to deal with the consequences.”
Trading with other nations is key to Australia’s future. Frydenberg stressed the importance of creating productive international trade relationships that “supports and creates jobs in Australia, allowing the sharing of technology and the exchange of ideas.”
What can you do today to improve your situation?
Currently interest rates are at record lows, which has had a flow on effect in returning properties prices to growth. Many Australians are looking at their finance and finding that their currently lender is giving them an noncompetitive product. In this case it is important to take emotion out of the situation.
If you can get a better loan with another lender, then assess your options.
If you would like to get in touch with the Dollars With Sense finance team then simply enter your details below and we will get in touch promptly.