Australia's Already In a Recession (You Just Can't See It)

[00:00:00]Everyone is worried about the same thing when it comes to the Australian economy.

[00:00:04]Are we about to get into a recession?

[00:00:05]And the answer is, well, we technically are, and we have been for about two years. You just cannot see it because you were staring at one number that the news keeps showing you. There's a KPMG report going around at the moment, and every finance channel is quoting it.

[00:00:19]Most of them cherry-pick one scary line and then try and sell you something. I am not going to do that. I am professionally a mortgage broker, but the aim of this channel is to educate rather than scare you. So, if that resonates with you, don't forget to hit the like button and subscribe to the channel. So, what I'm going to do today is walk you through what the report actually says, and then show you the one move that it points to if you want to own your own home to live in because the government just changed the rules, and we need to connect the dots. Let's start with the number that everyone is watching. The economy grew 0.3% last quarter. That's positive, so technically no recession, right? Well, that's the headline. If you split that up per person, and their GDP per capita went backwards again, and it's not a one-off, either. It's gone backwards nine times in the last 13 quarters. Per person, we have been shrinking for two years.

[00:01:06]That's the gap between what the news says and what your bank account is telling you. The economy's technically growing because we keep adding people into it, but the slice that each of us is getting keeps getting smaller and smaller. So, if you feel like you're working just as hard and going backwards, well, you're not imagining it because the data actually agrees with you. Real quick, before we get going, my name's David. I'm a mortgage broker, and this is what I do all day. I've helped people right across the country get into their first home, upgrade to their next one, and build serious property portfolios. Do you want to know exactly what's possible for you? There's a link below to book a 15-minute call. You'll get me, and my team will run your borrowing capacity, and if we're a fit, we get to work together.

[00:01:45]And let me be clear because this is where the fear merchants get it wrong.

[00:01:49]KPMG is not forecasting a proper recession. They've got growth staying positive around 1.2% this year. So, anyone telling you that a crash is locked in is selling you a pretty silly story. The honest read is a little bit quieter than that and a lot more useful.

[00:02:04]Now, the part that catches everyone out and the one that you probably care about the most is interest rates. At the start of the year, everyone told you that rates were coming down in 26, down, down, just like the Coles ads. Instead, we got three hikes. The cash rate is at 4.35% and held three meetings running and the next call's coming in August.

[00:02:21]I'm not going to predict the next move because that is just irresponsible. The report leans one way, three big banks lean the other. Westpac reckons there's more coming and nobody actually knows and anyone that tells you that they do is guessing with a confident voice. But, here is what matters for you. Rates are near their peak. Even if there's a bit more to go, we're pretty close, which means your borrowing power is about as tight as it's going to get. And when rates do come down and they will, every buyer sitting on the fence rushes back at once. That is not a discount waiting for you, that's a crowd of people waiting to push you in the wrong direction. Now, I know a lot of my recent videos have been speaking about a very similar topic, but I speak about it so often because it is so very true.

[00:03:02]Now, the next thing that the report shows, and this is the one that annoys me a little bit, is the two-speed market. You keep hearing national house prices this, national house prices that.

[00:03:11]They dipped 0.4% in June and that number, in my opinion, is absolutely useless because there is no national market. The national median sits around $938,000, but the average hides everything. Sydney and Melbourne are the softest they have been in years. Perth is up nearly 24% over the year, same country and completely opposite directions. The national figure tells you as much as the average temperature of someone with their head in the oven and their feet in a freezer. And underneath all of this, households are squeezed. Confidence is the lowest it has been since late 2024.

[00:03:43]Rents are up 5 to 7% with vacancy near 1%. So, as a renter, you've almost got no say over the next increase, which it most likely will be an increase. So, that is the picture. Growing on paper, but going backwards per person. Rates near the top, a market split in two, everyone feeling poorer. Sounds like a reason to sit on your hands, right? But here is why for one type of buyer, I think it's quite the opposite. Alongside all of this, the government made those negative gearing and CGT changes that I'm not going to rehash, but in one line, investors lost negative gearing and the capital gains discount on established homes. The intention was to tilt the market away from investors and towards people buying a home to live in.

[00:04:22]Now, watch what that does. The home you live in was left completely untouched.

[00:04:26]Still capital gains tax-free, always has been. So, they've made investing harder and more taxed and left the biggest tax shelter in the country exactly where it was, sitting on the house that you live in. This is the move they want you to make. On a level playing field, your own home is the most tax-friendly asset a normal Australian can hold. That is not my opinion, that is literally what is written in the budget and by the ATO's rules. Now, the word I'm carefully not using is safe. Prices can dip in the short term, and in Sydney and Melbourne right now, they are.

[00:04:57]What your own home does is lock in three things. It locks in your housing cost, so you're not at the mercy of the next rental review. It grows tax-free, and it forces you to save into something you can actually keep. That is what makes it a haven. Not that it can't dip, that it protects you while it grows. And it compounds. First home buyers who bought a few years back watch their place grow tax-free, and now they are rolling that gain straight into the next home to live in. Buy, grow it tax-free, move up, repeat. That is how normal people quietly build their wealth without ever touching the investor playbook the government just made incredibly worse.

[00:05:31]But this only works if you buy the right thing, because the same rule change is trying to push investor money into brand new property, and that is exactly the stock I would tell you to walk straight past. So, quickly, here is what we actually should be looking for. Number one, it's the biggest one in in opinion, it's owner-occupier appeal. Is this somewhere a person genuinely wants to live long-term and raise a family? Can you grow into it? You cannot grow into a one or two bedroom apartment. Life changes and you want a home that changes with you. Second, I want land. I want scarcity. Land goes up over time, buildings wear out. I will take an older place on decent land over a shiny high-rise every single time and so should you. Third, and this is a check that anybody can do, look at the ratio of renters in the suburb. You can I bought on realestate.com.au or you can go speak to your broker who might have the proper data for you as well. Lots of owner occupiers means stable demand and less of an oversupply risk. And the one to avoid in my opinion is the off-the-plan that the government wants you to buy. You are paying a developer premium for a cookie-cutter property that is most likely being sold to you with a little bit of a kick on top for the developer or seller of that property. So, it may not even be worth what you're paying for it. But, one last note on location because we said this at the start of the video. We have a two-speed national market at the moment.

[00:06:45]Melbourne right now is a standout in most people's eyes. It's a genuinely desirable to live here and I think it is pretty much on sale. Sydney is desirable, too. It's just a little bit expensive, so it's starting to come backwards in price a little bit before it possibly makes another run. Perth and Brisbane are running incredibly hot. So, if that is you in those markets, do your homework, get to the inspections, and know what things are really selling for before you jump in head first. One thing that doesn't get a lot of airtime when it comes to buying your own home is, sure, it feels like a safe place to live, but if you're leveraging quite high for these owner-occupied properties, the interest that you're paying is not something that can be productive for you in the new rules and in the old tax rules as well. So, it is always my suggestion that not only should you be able to get into your home to live in, you should also be leveraging all of the bank's features to be able to help you pay this mortgage off as fast as possible. I have so many of these videos on my channel, so I encourage you to go through, have a look at them, learn how to use your bank features, learn how to use your loan features, and pay your mortgage off faster. Please, if there's one thing you get from these videos, it's learning how to pay your mortgage off faster. So, why should you move now instead of waiting for it to be all clear? Because the all clear never rings a bell. When it finally feels safe, rates have already been cut, the fear is way gone, and everyone is flooding back in the market just at the same time as you, and also with potentially bigger budgets and more angst to get into the property market.

[00:08:06]Right now, we have nervous people selling their homes with no choice but to slash the price if they want to get a deal done. So, just remember, you're not exactly trying to pick the bottom of the market because absolutely nobody can.

[00:08:16]You're trading a little bit of the short-term softness to get yourself into a better position to be able to purchase your first home before everyone feels like it is a good time to buy again.

[00:08:25]Now, of course, there's always a caveat when it comes to my videos because I'm not here to push anyone. If your job feels shaky or you don't feel exactly secure in your financial position, this is not your moment. Do not buy at your limit, and honestly, maybe don't buy at all. But, if your income is secure and you've been getting your position ready for quite some time, this is a window you should seriously consider taking.

[00:08:44]So, here is where we land. We are in a recession that you cannot see on the news. Rates, in my opinion, are near the top, and the market is split in two, and in all of that noise, the government is actually pushing you to be able to buy your own home to live in. So, I want you to read past the headlines, buy something that people actually want to live in, and stop waiting for the green light that only switches on once the opportunity is running faster than you can. And the people who look back on this year and feel lucky will not be the ones who timed it perfectly. They'll be the ones who got themselves ready and made the decision that suited them perfectly.