MONEY TALKS
THE PANDEMIC HAS REWRITTEN OUR FINANCIAL FUTURES. HERE’S HOW TO COPE – AND EVEN THRIVE – IN OUR NEW REALITY
If the coronavirus pandemic has you worried about your finances, read this…
we are all counting the cost of coronavirus. Much of it is still unknown: how many lives lost, how many families broken. With the stakes so high, it might feel uncomfortable to weigh up the pandemic’s financial cost. But most of us – including governments – have no choice but to do just that. “This will rewrite economics textbooks,” says Lacey Filipich, author of Money School. “Governments are expecting a recession – which is where the economy hasn’t grown for six successive months – and are working hard to avert a depression. That’s a sustained, widespread economic downturn.”
And events are already disproportionately affecting women, says financial journalist Bianca Hartge-hazelman, founder of Financy.com.au and the Financy Women’s Index. “Given that women tend to earn less than men on average, and we have fewer women in managerial positions, women are likely to be more affected by job cuts,” she says. “As well, a lot of women work part-time and casually around childcare, so they’re making tough decisions. For a lot of people, family comes first, and many women will have to go on unemployment benefits.” You don’t need an economics professor to explain how disastrous a depression could be if coronavirus has meant you’ve lost your job – you already know rent and bills are still due, Centrelink is difficult to navigate, and family and friends are suffering, too. We’ve got practical tips on how to cope in a financial crisis in the pages ahead. But at some point this will end, and we have to consider: what’s next?
“What we know from history is that the economy post a crisis always looks very different to the economy pre-crisis,” ANZ chief executive officer Shayne Elliott said in March. And there are a few ways Australia’s financial future could change. “There are two different scenarios,” says Filipich. “There’s a scenario where we get this under control, it does change the economy, but essentially it’s back to business as usual. But there’s another scenario, where we realise that we don’t live in an economy, we live in a society. And that needs to dictate the decisions we make and how we shape the future.”
How the pandemic could actually improve our collective financial future is still unknown, but the widespread government assistance via Centrelink for anyone affected by coronavirus is a clue, Filipich says. “There’s the concept of universal basic income (UBI): the government pays everyone minimum living expenses, and anything you earn over the top is yours,” she explains. “Eventually there won’t be enough paid work to go around anyway, because we will have automated everything.
Coronavirus might trigger UBI, because that’s effectively what the government has put in place – it’s not universal, but it’s bloody close. It was already something economists were looking at for, say, 2040. So maybe we just need to bring it forward.”
Women in particular might end up benefitting from the pandemic, Hartge-hazelman says. “Events like this can be the catalyst for great social change. During WWII, we saw this rise of female empowerment as women were encouraged to work while men were away fighting. So we had this influx of women in the workforce. Now, we’re at another critical point where we’ve been pushing for so long for flexible work and work-from-home arrangements to be the norm rather than just a women’s thing. It will be harder for businesses to argue you can’t work from home, because we’re seeing it is functioning. So we’re more likely to get support for flexibility, which should help encourage greater participation of women in the workforce.”
On an individual level, Filipich is also optimistic. “For younger people, this could be the making of them,” she says. “If you’ve got some cash set aside and you don’t have debt, there are a lot of assets on sale at the moment. The share market has dropped significantly, so you could buy a share for $5 that was
$10 not long ago. And if you believe the market’s going to go back up to that
$10 a share, you could build equity quickly.” Of course, you should only ever invest money you don’t need in the short-term. It’s the same with property, with potential bargains coming up for sale and enabling formerly pricedout buyers to enter the market (although Filipich says to never go into debt if you’re unsure of your income). Still, for some, a recession could be a chance to get a foot on the ladder.
“We don’t know how long the market’s going to take to turn around,” Filipich says. “But I believe it will, because human beings like to improve things. We will continue to innovate, we will continue to add value. So I don’t see any reason why in a few years’ time, we wouldn’t still have a thriving economy. It just might look different.”