Australia Sets Sails for Smoother Ride In 2009

By John Symond, Executive Chairman of Aussie

While we are continue to see fallout from economic crisis that has spread across the world, Australia is in relatively good shape to sail through the current economic slowdown.

Australia is truly a lucky country as we have a very strong and well regulated financial sector, as well as lower fuel costs and the benefits of the Federal Government’s stimulus package now flowing through the economy.

While it is too early to say that the financial crisis is over, there are signs of a revival in sectors of the economy, while experts are claiming that the bottom of the housing market in the US has been reached.

We still have more than 95 per cent of local workers in jobs and interest rates are at 30 years lows, with the prospect of further interest rate cuts of up to 1.5 per cent this year.

With these low rates, it might be worth considering fixing all or part of your home loan, as it will provide security if a recovery commences later this year and this pushes rates back up.

In this climate it would also be wise to maintain your interest repayments at their previous or current higher levels, as the extra repayments will save thousands of dollars and years off your home loan.

I believe it is unwise to consolidate your credit card and “toxic” personal debts with your home loan as it will just extend your repayment period and financial headaches for up to 30 years.

A better method is to consolidate your debt into your mortgage, but split the toxic debt and maintain the higher repayments. This will result in repaying the non-home loan component in half the time it would have taken previously.

If your financial situation tightens during the year, perhaps as a result of losing employment, ensure you talk to your mortgage broker or lender as early as possible so they can help you out before it is too late.

There are always a range of options to mitigate your problems, including renting out your principal residence and moving back to your parents’ home or moving in with friends and jointly paying rent.

I believe there is a bubble growing in the first home buyer’s market, on the back of the government grants, and purchasers need to be very careful they are not lured into paying too high a price for a property.

Investors are re-emerging at the bottom end of the market and competing with first home buyers for properties, causing price rises which in some cases are inflated.

The rest of the property market will be soft throughout the rest of 2009, however areas close to CBD’s and major infrastructure eg, train stations, will continue to be resilient. This offers great opportunities for astute home buyers and investors.

We should be careful not to talk ourselves into a recession as there are enough good signs in the economy for us to escape the worst of the economic problems that are being experienced overseas.

So if we stay positive and work hard, Australia will come out of the current slowdown faster and less battered than any other country in the world.

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