(03) 9020 2905If you’ve ever been on one of those Hollywood-hippy, vitamin-enriched, strict fruit and vegetable juice diets, then you’ll know why Australia could do with a recession.
For the rest of you Gen Xers (including me – no way I’d drink that gunk), think about an ocean swim with a hangover.
It’s about cleansing. A recession is hippy juice for the economy’s soul.
Face it, we’ve been partying like its 1987 and we’re Gordon Gekko and Christopher Skase.
This time around, the cause was credit that was far too easy. Too many high risks given too much money.
Economies get fat and lazy, as do businesses, governments, households and individuals. Fat can still be alluring if it’s loaded. But in order to score when you’re poor, you need to kick the kilos.
It’s never easy getting back into shape without a Jane Fonda or Richard Simmons video. But a recession sure puts the spotlight on the flabby bits.
Does it matter if we have a recession? Consider the following. Option one: four quarters of growth of -0.1 per cent, (a total of -0.4 per cent). Option two: consecutive quarters reading -1, +0.1, -1, +0.1 per cent (a total of -1.8 per cent).
The first is a recession. The second is not, even if it is 4.5 times worse and probably means an extra 200,000 people out of work.
For investors, a recession is simply another opportunity. By the time we enter a recession (or not as is the case so far), markets have already had their firestorm.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and director of Castellan Financial Consulting.